🇨🇳 China, the world’s overperformer

What’s Going On Here?

Data out on Thursday showed that March was kind to China, with exports defying economists’ expectations.

What Does It Mean?

Nobody was holding out much hope for China’s exports this time around. They’d already dropped 6.8% in January and February, and with South Korean exports – normally a global trade bellwether – plunging further last month, a weak March seemed to be written in the stars. At any rate, it was written in the forecasts, with economists betting on a 7%-plus drop that never actually materialized.

See, despite the sluggish US market, demand remained strong elsewhere – especially in Southeast Asia – and it didn’t hurt that China’s factories finally returned to business as usual. Cars were the top performers, with yearly exports up 82% in dollar terms, followed by steel products and clothing. In the end, then, total exports grew by a wholly unexpected 14.8% – the biggest divergence from expectations in years.

Why Should I Care?

The bigger picture: No training wheels.

Thriving exports were a life-support machine for China’s economy during the country’s Covid lockdowns – and this upswing will only help propel the country toward its growth targets. Mind you, the World Trade Organization sees global trade dipping below historic growth trends this year – and things could get especially thorny if the US stagnates in the second half of 2023. That might hit China’s exports – but if economists are right that there’s a new consumer-focused stimulus program in the pipeline, then there’s hope the domestic economy could plug the gap.

Zooming out: Bei-bling.

The world’s biggest luxury group, LVMH, is feeling pretty bullish about China’s prospects after its own strong results this week. While its US business struggled, its Asian operations, led by China, picked up the slack. That could be good news for other European luxury firms too – which might be why the likes of Richemont, Hermès, and Moncler also saw their stocks jump.

What’s Going On Here?

Delta Air Lines is gearing up for brighter skies.

What Does It Mean?

Delta's last quarter was more turbulence than smooth sailing, with fluctuating fuel prices and flight-grounding storms racking up a worse-than-expected $363 million loss for the airline. Add to that a new pilot’s contract including raises of 34%, and you'd expect Delta to be hitting the panic button. But the airline’s actually optimistic about the future: after all, it typically rakes in the majority of its revenue during the bustling spring and summer travel season, and international demand is currently flying high. In fact, Delta’s already experiencing a surge of momentum, citing record bookings for the summer and boasting ten of the highest sales days in its history last month. That might be why the airline forecast better-than-expected revenue and profit for this quarter, sending stock skyward.

Why Should I Care?

Zooming in: Going up in the world.

Consumer demand could still falter if a recession hits, but Delta's staying positive. See, the firm's got a backup plan in case adversity strikes: doubling down on premium travel offerings. The thinking is that an economic nosedive might clip the wings of budget-conscious coach passengers, but it’ll be barely noticed by well-heeled jet-setters (who are a whole lot more profitable for airlines anyway). The upshot: every day this year, Delta’s planning to offer 15,000 more premium seats than it did in pre-pandemic times – including premium options on each flight from this summer onward.

For markets: Crash landing.

Airline stocks kicked off the year strong, but concerns that demand could fizzle out have investors biting their nails. Add in the recent oil price spike following the OPEC meeting earlier this month – which could further hike fuel costs – as well as the industry's lingering debt burden, and it’s no wonder sentiment has reversed. In fact, investor bets against the industry are now at their highest since Covid struck.