Today’s trading in the US and Europe has been dominated to the market’s reaction to manufacturing PMI reports and another big drop for crude oil.
Stocks have been trading under water for much of the day but European indices
finished with declines of less than 0.5% and US markets have moved back into positive territory in the afternoon. This indicates that early weakness was just markets digesting Friday’s big gains and that momentum has been turning increasingly positive heading toward today’s Asia Pacific trading day.
Crude oil, however, fell off sharply again on a combination of increasing OPEC production and ongoing concerns that a soft China economy could drag on demand.
US manufacturing PMI came in below 50 for a fourth straight month slightly below expectations at 48.2. An increase in new orders back above 50 appeared promising but traders appear to have discounted that for now. Considering the huge increase in Chicago PMI announced Friday, the data indicates that some regions continue to struggle, likely those with higher exposure to the oil and gas sector.
The biggest impact of the PMI report was on USD which started to sink again on growing speculation that the Fed may not raise interest rates four times this year. This afternoon FOMC Vice Chair Stanley Fisher, who had reiterated the 4 increases party line a month ago spoke today of watching tightening of financial conditions and that a slowing global economy could impact the US. Additional signs that the Fed could back away from its current agenda and lower the number of rate increases could continue to weigh on USD.
USD weakness ignited another rally in gold, which often trades against it. European currencies like GBP and EUR also benefitted from the falling greenback. JPY continues to underperform however in the wake of the Bank of Japan’s surprise rate cut. Oil sensitive currencies like CAD and NOK also underperformed as the falling commodity price trumped Canada and Norway’s improving manufacturing sectors.
AUD has also been climbing heading into today’s RBA meeting. Although commodity prices remain weak and a potential drag on the economy, rising consumer price inflation and full time job growth mean that the RBA is likely to keep interest rates on hold again. With AUD back above 70 cents US, however, Governor Stevens could try to talk the dollar down in order to try and contain recent advances.
Google reports earnings after the close today.
Significant announcements released overnight include:
US personal income 0.3% vs street 0.1%
US personal spending 0.0% vs street 0.2%, previous revised up to 0.5% from 0.3%
US core PCE inflation 1.4% as expected vs previous 1.3%
US construction spending 0.1% vs street 0.6%
Manufacturing PMI reports:
Canada RBC 49.3 vs previous 47.5
US Markit 52.4 vs street 52.7
US ISM 48.2 vs street 48.5
US ISM new orders 51.5 vs previous 49.2
US ISM prices paid 33.5 vs street 35.0
UK 52.9 vs street 51.6
Germany 52.3 vs street 52.1
France 50.0 as expected
Spain 55.4 vs street 52.5
Italy 53.2 vs street 54.8
Norway 49.2 vs street 46.0
Sweden 55.5 vs street 56.0
Greece 50.0 vs previous 50.2
Poland 50.9 vs street 51.8
Russia 49.8 vs street 47.5
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
11:00 am AEDT NZ ANZ commodity prices previous (1.8%)
2:30 pm AEDT Australia RBA interest rate 2.00% no change expected
4:30 pm AEDT India RBI interest rate 6.75% no change expected
TBA US Iowa caucuses results
8:00 am GMT Spain unemployment change street 71K
8:55 am GMT Germany unemployment change street (8K)
9:00 am GMT Italy unemployment rate street 11.2%
9:30 am GMT UK Construction PMI street 57.5
10:00 am GMT Eurozone unemployment rate street 10.5%
10:00 am GMT Eurozone producer prices street (2.8%)
10:00 am GMT SNB Jordan speaking
9:45 am EST US ISM New York previous 62.0
1:00 pm EST FOMC George speaking
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