Holidays, Manufacturing PMI Releases, and Japanese Recession Concerns

May 2, 2016

There is a wide spectrum of holiday closures today due to the confluence of labor day observances (May Day), the Greek Orthodox Easter Monday, and the early spring British bank holiday.  Markets are shut in Russia, China, Singapore, Taiwan, Hong Kong, Thailand, Malaysia, Vietnam, Laos, Sri Lanka, Greece, South Africa, Kenya, Bosnia, Cyprus, Ireland, Bulgaria, Romania, Malta, and Slovenia.

Confusion over Bank of Japan policy and mounting concerns about a recession there were reflected in a 3.1% dive of the Nikkei-225 (-6.6% in the past two sessions).  Japan will be closed Tuesday through Thursday for Golden Week (Constitution Day, Greenery Day and Children’s Day).  The 10-year Japanese JGB yield fell four basis points to -0.13%.    Dollar/yen rose to a new high for the move of 106.14 but settled back to a net 0.1% downtick of 0.1%.

Japan’s manufacturing purchasing managers index dropped 0.9 points to a 39-month low and sub-50 reading of 48.2 in April.  A 7.2% on-year advance in March motor vehicle sales was reported following drops in the first two months of 2016.

In other open stock markets in the Pacific Rim, equities dropped 0.8% in South Korea, 0.7% in India, 0.6% in Indonesia, 0.4% in New Zealand and 0.2% in Australia.  In European trading, share prices have dipped 0.2% in Italy but show rises so far of 1.0% in Germany, 0.6% in Spain, 0.5% in France and 0.4% in Switzerland.

The dollar softened by a further 0.5% against the Australian and New Zealand dollars, 0.3% versus the euro, loonie and sterling, and 0.2% relative to the Swiss franc.  The dollar is 0.1% firmer against the yuan.

Dollar weakness continues to power precious metal prices higher.  Comex gold rose above $1,300 for the first time in 15 months but is currently at $1,298.77, still a net 0.4% advance.  WTI crude oil fell 0.6% to $45.63 per barrel.

Announced purchasing manager manufacturing results in April aside from the aforementioned Japanese report were as follows:

  • Euroland’s index edged up 0.2 points to a 3-month high of 51.7, but both France and Germany had disappointing reports.  The French PMI slipped 1.6 points to a one-year low of 48.0, indicating a significant pace of factory activity contraction.  The German PMI printed at 51.8, a 3-month high but 0.1 point lower than its preliminary indication.  The Austrian and Dutch PMI scores of 52.0 and 52.8 were 2-month lows.  In contrast, Italy’s PMI of 53.9 beat analyst forecasts and constituted a 4-month high, while Spain’s 53.5 was at a 2-month high and also exceeded forecasts.
  • China’s government reported a 50.5 manufacturing PMI, the second reading in a row above 50, and a non-manufacturing PMI index of 53.5, which was closer to March’s 53.8 than February’s 52.7.  Recent Chinese data have generally surpassed expectations, alleviating worries about a hard landing to some extent.
  • Australia’s performance of manufacturing index sank back 4.7 points to a 3-month low of 53.4.
  • India’s PMI reading, 50.5, was the lowest since 49.1 in December, but input price inflation hit an 11-month high.
  • Turkey’s PMI plumbed more deeply below 50 to a 7-month low of 48.9.
  • After scoring a 15-month high in March, the Swiss manufacturing PMI rose another 1.5 points to 54.7 in April.
  • Sweden’s 54.0 reading was the highest since January.
  • Norway’s 48.0 after 46.7 the month before was a 2-month high.
  • South Korea’s 50.0 score implies no change after three straight months of contracting activity.
  • Taiwan’s PMI slipped 1.4 points to a 2-month low of 49.7.  Input price inflation was at a 21-month high, but both output and orders contracted.
  • The Vietnamese PMI of 52.3 indicated the strongest rate of expansion in nine months.
  • Russia’s PMI fell 0.3 points to an 8-month low of 48.0.
  • The Czech PMI fell 0.7 points to a 16-month low of 53.6.
  • Poland’s 51.0 was 2.8 points lower than the March reading and at a 3-month low.

Markets still await the U.S., Canadian, and Brazilian PMI reports.  U.S. construction spending also gets released today.

New York Fed Reserve President Dudley said the Fed’s ability to respond to failing banks is still not up to desired standards.  Atlanta Fed President Lockhart speaks later.

The National Australia Bank’s monthly indices of business conditions and confidence in that economy fell by three and one point to +9 and +5 in April.  Expected Australian inflation slowed 0.2 percentage points to 1.5% according to the TD-MI index.

Swiss retail sales volume fell 1.3% between March 2015 and March 2016.

In the year to April, consumer and producer prices in Thailand respectively edged up 0.1% and fell by 1.7%.  Indonesian CPI inflation of 3.6% in April was down from 4.5% in March and below analyst forecasts.

Standard and Poor’s retained a negative outlook on Britain’s triple A credit rating, taking account the possibility of a no vote in the upcoming EU should we stay or should I go referendum next month.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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