Chinese Exports, Imports Grow Faster Than Expected In July As Surplus Shrinks

The National Bureau of Statistics in China overnight announced that the country's trade balance shrunk in July as import growth far exceeded expectations. Commodities imports rallied sharply in July, sparking gains in industrial metals, specifically copper.

The world's second largest economy reported that the trade surplus declined to $17.82 billion in July from $27.12 billion in June. Economists were expecting the trade balance to decline much more modestly to $26.9 billion.

Imports Gain

The drop in the trade surplus was driven by a much larger gain in imports than expected, driven by imports of oil and iron ore. Imports grew at a 10.9 percent annualized rate in July compared to the expected rate of 1.0 percent. In June, imports declined 0.7 percent.

Imports of oil and iron ore rebounded from multi-month lows last month as more raw materials were shipped in to rebuild depleted stocks. Commodity imports last month were broadly strong, with iron ore purchases rising 17 percent from June to a record high of 62.3 million tons.

Soy imports also hit a record high for the second straight month while crude imports were most likely boosted by refiners boosting stocks as many refineries came back online after a three-month lull.

Exports Rise

Exports rose as well in July, with exports gaining 5.1 percent in July, also outpacing estimates. Economists were expecting exports to rise 2.0 percent, accelerating from June's 3.1 percent decline.

Commodities Gain

China sensitive commodities gained on the news while oil sold off. Copper futures rallied 2.46 percent pre-market to $325.10 per pound while aluminum and tin futures both rallied as well.

Soybean futures rose 0.97 percent pre-market while soybean meal futures gained 1.18 percent on the back of the higher soybean imports. Also, the Australian dollar rallied against the U.S. dollar on the news on the back of the stronger metals imports, gaining 0.82 percent to .9073. The pair is still down about 12.76 percent year-to-date.

Australian shares rallied on the news as well, with the S&P/ASX 200 Index rising 1.07 percent overnight on the positive China data. The mining heavy index gained as imports of metals rose, in tandem with the currency pair.

Miners rallied in pre-market trading as Freeport-McMoRan Cooper and Gold FCX rose 2.55 percent to $30.18, taking out the key $30 level. ArcelorMittal MT rose 3.58 percent pre-market as well and Molycorp MCP rose 2.83 percent as the rare earths metal company reports earnings later.