Sector movers: Chinese September trade data triggers move into defensives

Defensive issues and real estate investment issues traded placed with cyclicals on Thursday, with weaker-than-expected Chinese trade numbers acting as the catalyst, although in recent sessions some strategists had pointed out that a pull-back in the former might have created some value.

To take note of, it was dividend-paying stocks which led gains Stateside after the release of the latest Fed minutes in the previous session.

Chinese exports dropped at a 10% year-on-year clip in September (consensus: -3.3%), alongside a 1.9% fall in imports (consensus: -0.6%).

Steel and Mining names bore the brunt of the selling in the wake of the above figures, as weaker Chinese imports in particular tend to be reflective of domestic weakness in the world's third-largest economy.

Nevertheless, while it was clear that China faced a challenging external environment the outlook was not quite as poor, according to some economists.

"We remain wary on China's export outlook given headwinds to global growth and business investment. Policies will continue to focus on managing domestic demand, with the help of an expansionary fiscal policy, in the remainder of the year," HSBC's Julia Wang and Jing Li said in a research report sent to clients.

"The drop in imports could be an early sign that the recent recovery in economic activity is losing momentum. Nonetheless, we would caution against reading too much into a single data point given the volatility of the trade figures," Julian Evans-Pritchard, China economist at Capital Economics, said in a research report sent to clients.

Thursday's underwhelming data added weight to the possibility that the People's Bank of China would maintain its recent policy of gradual trade-weighted renminbi depreciation in coming quarters, Evans-Pritchard said.

China's commodity imports slowed down in September but year-to-date the rate of growth in those of oil, copper metal and iron ore were nevertheless considerably higher than at this same time one year ago, at 14%, 11% and 10%, respectively, Barclays's Kevin Norrish pointed out.

Life insurers and personal goods producers both tracked longer-term Gilt yields lower, with REITs likely getting an additional boost from the modicum of stability on offer in cable.

As of 1753 BST the yield on the benchmark 10-year Gilt was down by two basis points to 1.02% while cable edged higher by 0.29% to 1.2241.

To take note of as well, a warning from HSBC technical analyst Murray Gunn in the previous session that there was now a "very high" possibility of a "severe fall" in the US stock market was still reverberating through markets.

According to Guinn, the key levels to watch for were 17,992 in the Dow Jones Industrials and 2,116 on the S&P 500.

Top performing sectors so far today
Real Estate Investment & Services 2,389.09 +1.83%
Real Estate Investment Trusts 2,793.38 +1.75%
Tobacco 56,496.45 +0.69%
Gas, Water & Multiutilities 6,360.44 +0.61%
Industrial Transportation 3,047.06 +0.61%

Bottom performing sectors so far today
Industrial Metals & Mining 1,979.59 -7.25%
Forestry & Paper 17,212.63 -3.50%
Life Insurance 6,966.29 -3.42%
Mining 12,916.79 -3.30%
Personal Goods 31,527.45 -2.98%