China manufacturing pickup and central banks boost stocks and commodity currencies
20:00, 31 October 2016
· By CMC Markets
Stock markets have stabilized overnight but crude oil remains under pressure with WTI falling 0.4%. The Hang Seng is up 0.9% while the FTSE and Dax are up 0.2%. US index futures are up 0.25%.
Manufacturing PMI reports for October from around the world have been coming out overnight, with the US and Canada mid-morning. China did particularly well picking up from the neutral 50 over 51 to show renewed upward momentum after months of sputtering and beating street estimates. Australia popped back up above 50 into expansion territory. Sweden, Russia and India also did really well while the UK and Japan were in expansion territory but a touch below expectations. Greece's contraction accelerated again, an ongoing failure on the part of the EU to support its members and a potential flashpoint for future instability.
The good news from China has attracted new interest to stocks and commodity currencies like AUD and NZD. CAD is up but lagging behind a bit due to the oil overhang. The loonie could be active this morning around Canadian August GDP and PMI reports with traders still looking for signs of the summer rebound the Bank of Canada had been hoping for.
Two central bank meetings have been moving currency markets as well. The RBA maintained interest rates and had a neutral not dovish outlook helping to support an AUD rebound along with the positive Australian PMI report.
The Bank of Japan maintained its negative rate and QQE but pushed out the target date for meeting its inflation target to fiscal 2018 from fiscal 2017. This suggested stimulus remains here to stay for longer even if not increased, a neutral to dovish stance that had JPY falling against USD, EUR and GBP overnight.
News that Mark Carney is likely to stick around as Governor of the Bank of England through mid-2019 to provide stability through the Brexit Article 50 process may also be helping to support Sterling today.
Earnings season continues today with more Canadian companies getting into the game. So far today, Thomson Reuters and WestJet have come in well above expectations. Molson Coors beat the street by a penny.
WestJet $0.97 vs street $0.94
Thomson Reuters $0.54 vs street $0.48, to take a $200-$250 million charge next quarter related to a restructuring program
Molson Coors $1.03 vs street $1.02
Archer-Daniels $0.59 vs street $0.46
Bank of Japan monetary policy 2% inflation target extended out to FY 2018 from FY 2017
Australia RBA interest rate 1.50% no change as expected
Australia commodity index 16.0% vs previous 3.1%
NZ QV house prices 12.7% vs previous 14.3%
Manufacturing PMI Reports:
China official manufacturing 51.2 vs street 50.3
China official non-manufacturing 54.0 vs previous 53.7
China Caixin manufacturing 51.2 vs street 50.1
Japan 51.4 vs previous 51.7
Australia 50.9 vs previous 49.8
India 54.4 vs street 52.1
UK 54.3 vs street 54.5 vs previous 55.4
Sweden 58.4 vs street 55.0
Norway 52.7 vs street 52.8
Russia 52.4 vs street 50.9
Greece 48.6 vs street 49.9
Upcoming significant economic announcements include:
8:30 am EDT Canada Aug GDP street 1.3%
11:45 am EDT Bank of Canada Poloz speaking
3:20 pm EDT Canada Morneau fall economic statement
Upcoming manufacturing PMI reports:
9:30 am EDT Canada previous 50.3
9:45 am EDT US Markit street 53.2
10:00 am EDT US ISM PMI street 51.7
10:00 am EDT US ISM new orders previous 55.1
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