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Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
The Canadian government bonds rallied on Wednesday after merchandise trade deficit unexpectedly widened to a record in March due to weaker exports. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 2 bps to 1.436 pct and the yield on the 2-year bonds dipped 3 bps to 0.615 pct by 1315 GMT.
Canada’s merchandise trade deficit widened to $3.41 billion in March, higher than the market expectation of $1.40 billion deficit, from revised $2.47 billion deficit in February (previous was -$1.91 billion). This was mainly due to weaker exports which dropped to the lowest in more than 2-years. Moreover, March exports declined 4.8 pct to CAD 41 billion (lowest since January 2014), as compared to 6.6 pct in February and shipments fell in 10 of 11 major categories, including a 6 pct fall in motor vehicles and a 5.4 pct drop in metals and non-metallic minerals.
Last week, the Bank of Canada’s Governor Poloz said that post-crisis global economy still faces severe headwinds and low interest rates are keeping headwinds at bay. Said trade slowdown should reverse as global economy recovers and pace of integration slower, trade at new balance point. Said troubling number of protectionist policies since the crisis and about half of trade slowdown linked to lower investment. If rates suddenly returned to 3-4 pct, a recession would occur, he added.
Furthermore, the February Gross Domestic Product (GDP) shrunk 0.1 pct m/m, beating the market expectation to fall 0.2 pct m/m, it was up 0.6 pct in January. Within goods-producing industries, agriculture fell -1.3%, utilities declined 0.2%, mining and quarrying dropped 0.8%, and manufacturing fell 0.8% in February. Meanwhile, construction rose slightly by 0.1%. Major subcategories within manufacturing declined in the month. In service sectors, wholesale trade dropped sharply by 1.8%, which as countered by retail sales’ strong growth of 1.4% in February. The markets will now look forward to Friday’s employment change data (1230 GMT).
