A Slew of Favorable Purchasing Manager Surveys and Better-than-Expected Corporate Earnings Reports on FOMC Day

February 1, 2017

This first day of February has a scheduled FOMC policy statement release. The committee is not expected to raise its interest rate as it did in December, but investors hope to find clues to how many rate hikes might occur in 2017.

More evidence emerged that the global economy experienced stronger demand, profits, and inflation coming into the new year. Rising protectionism and populist discontent cast a long shadow of uncertainty, however.

China and Taiwan remained shut for the Lunar New Year holiday, but other Asian markets are open.

The dollar rose overnight by 0.7% against the kiwi, 0.4% relative to the yen and loonie, but only 0.1% versus the euro and Swiss franc. The peso rebounded 0.7%, and sterling is 0.3% higher.

Stocks in Asia rose 1.8% in India, 0.7% in Singapore, and 0.6% in Japan, Indonesia and South Korea. Stocks slid 0.2% in Australia and 0.1% in New Zealand but got a boost in Europe from strong manufacturing survey results in January that were reported. Equities are up so far by 1.3% in France, 1.0% in Germany, 0.8% in Greece and Switzerland, 0.4% in Italy and 0.3% in Spain.

The ten-year British gilt and German  bund yields advanced by three basis points today.

West Texas Intermediate crude oil has climbed 0.6% to $53.13 per barrel. Comex gold is trading 0.2% higher at $1,210.50 per troy ounce.

Euroland’s manufacturing purchasing managers index (PMI) rose 0.3 points to a 69-month high of 55.2. There was also evidence of intensifying input cost pressure that is likely to make ECB officials less predisposed to extending quantitative stimulus beyond the current timetable.

PMI readings within Euroland rose to a 70-month high of 57.3 in Austria, a 36-month peak of 56.4 in Germany, a 20-month high of 55.6 in Spain and a 68-month high of 53.6 in France. The Dutch score of 56.5 was the second highest in the region but at a 3-month low. Ireland’s PMI, likewise, was solid at 55.5 but at a 2-month low. Italy’s PMI of 53.0 was also a 2-month low. Only disappointment in the bloc belonged to Greece, where a 16-month low PMI of 46.6 after 49.3 in December attested to an accelerating downturn of manufacturing activity.

The British manufacturing PMI slipped 0.2 points to 55.9 after posting a 30-month high at the end of 2016.

The Swiss PMI in manufacturing fell back a full point to a still respectable score of 54.6, lowest since September nonetheless.

Sweden’s PMI leaped 1.9 points to 62.0, best since mid-2010.

Norway’s PMI was 51.4, a 2-month low. 50 is the dividing line between expansion and contraction.

The Czech PMI scored a 55.7, best since January 2016. Poland’s PMI was 54.8, a half point better than in December and constituting a 22-month high. Hungary’s muscular PMI of 56.5 was at a 3-month peak.

Helped by firmer oil prices and the U.S. election result, Russia’s manufacturing PMI of 54.7 was the best reading since March 2011.

Although Chinese markets remain closed, the government-compiled purchasing manager indices for both manufacturing (a 3-month low of 51.3) and non-manufacturing (a 2-month high of 54.6) were released.

Japan’s manufacturing PMI score of 52.7 in January showed the best conditions in 34 months.

India’s 50.4 PMI reading in manufacturing followed a dip below 50 and represents a 2-month high.

Australia’s performance of manufacturing index dropped 4.2 points to a 3-month low.

The Thai PMI matched December’s 13-month high of 50.6.

But South Korea’s PMI fell 0.4 points to an 11-month low of 49.0, and the Filipino PMI reading of 52.7 was the lowest for this data series.

Indonesia’s PMI reading of 50.4 was a 4-month high, and Turkey’s PMI reading of 48.7 was a 2-month high.

Brazil’s PMI fell 1.2 points to a very depressed 44.0, which indicates the fastest rate of contraction in manufacturing since last June.

Quarterly labor statistics reported in New Zealand show a higher 5.2% jobless rate, employment growth of 0.8% from the third quarter and 5.8% on year, a labor participation rate of 70.5%, and wage growth of 0.4% on quarter and 1.6% on year.

Britain’s Nationwide house price index for January reflects declining momentum, with a 0.2% monthly rise but the smallest on-year increase (4.3%) since at least last February.

British shop prices fell 1.7% between January 2016 and last month. The U.K. consumer confidence index rose two points to a three-month high of minus 5 in January but was 7 points lower than the first month of 2016.

The British parliament is voting today to give the government proper authorization to trigger Article 50 and negotiate an exit from the EU.

U.S. President Trump has appointed Neil Gorsuch, age 43 and a federal appellate judge in Colorado, to fill the late Judge Scalia’s vacant seat on the Supreme Court. The decision requires a senate-confirming vote of approval.

Japanese motor vehicle sales were 8.6% higher than a year earlier in January, down from a 10.8% advance in December.

Between December 2015 and December 2016, South Korean industrial output and retail sales respectively rose 4.3% and 1.6%.

In the year to January, Indonesian consumer prices rose 3.5%, while Thai producer prices went up 3.1%.

Bank of Canada Governor Poloz said during a speech that the loonie had been lifted in the wake of U.S. dollar appreciation since Trump’s election and that this and rising protectionism are likely to depress exports to a still-unknown degree.

ADP’s estimate of U.S. private-sector jobs growth in January of 246K is 95K greater than it estimated for December and way above analyst expectations. This news comes just hours before the FOMC releases its first policy statement of 2017. The ISM will be reporting the U.S. manufacturing PMI today as well.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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