The recent trends in the global capital markets are reversing today. Although the price action yesterday warned of the risk, there have been five fundamental developments that are contributing to the price action today.

First was China's September trade figures. The balance was little changed at $60.34 bln 9$60.24 bln in August). The consensus had forecast a fall toward $48.2 bln. The larger than expected surplus was driven by less weak exports and considerable weaker imports.  

Exports fell 3.7% after a 5.5% decline in August. The consensus was for a 6% drop. It is the third negative year-over-year print in a row and is the sixth decline in the first nine months of the year. Imports plummeted 20.4% after a 13.8% decline in August. The consensus called for a 16% decline.   It is the 11th consecutive month that imports fell on a year-over-year basis. 

Although some observers see the mini-devaluation in August as having played a role with today's report, we are more skeptical. The goods shipped in August were ordered months ago, and the devaluation was too small in the context of the value-added costs incurred in yuan to have much impact. We would highlight the important role that prices are playing. 

We note that crude oil imports rebounded in September from three-month lows. China is building its strategic reserves with cheap oil.  Also, Chinese refiners are a large source of demand. Iron ore imports increased to the highest level of the year. Nevertheless, the Antipodean currencies that have had a strong run are seeing their advancing streaks snapped. The Australian dollar is the weakest of the majors, off about 0.85% near midday in London.

The Canadian dollar reversed lower yesterday and is extended those losses today. It is off about 0.5%.  After testing CAD1.29 on before the weekend and again yesterday in holiday-thinned trading, the US dollar rebounded to near CAD1.3070. The first retracement target is found near CAD1.3110.