Risk Off

February 3, 2014

Disappointing Chinese data rules market mood even as several Asian markets — Malaysia, Vietnam, Taiwan and of course Hong Kong and China — remained shut for the Chinese New Year. 

Released government-authorized CFLP manufacturing and non-manufacturing purchasing managers surveys for China accentuated that economy’s slower pace of growth.

  • The factory PMI fell a half-point to 50.5 in January, signaling the faintest rate of manufacturing growth since June.
  • The services PMI fell 1.2 points to a 23-month low of 53.4.

The Chinese reports over-rode upbeat European manufacturing PMI results, sending both Asian and European share prices lower.  Japan’s Nikkei sank 295 points or 2.0% and has now fallen 10.3% since the end of 2013.  Equities declined 1.5% in India, 1.1% in South Korea and Singapore, 0.7% in Indonesia and 0.5% in Sri Lanka and New Zealand.  While Aussie stocks are unchanged, share prices in Europe had so far lost 0.9% in Milan, 0.7% in Frankfurt and Madrid, 0.5% in Paris, 0.3% in Zurich and 0.2% in London.

The dollar has depreciated 0.6% against the loonie, 0.5% relative to the Aussie dollar, 0.3% vis-a-vis the kiwi and Swiss franc, 0.2% against the yen and 0.1% versus the euro.  The dollar is unchanged against the yuan and 0.6% firmer against sterling.

The 10-year Japanese JGB and German bund yields are unchanged, while the 10-year British gilt yield moved up a basis point.

The price of gold rose 0.5% to $1,246.40 per ounce.  WTI crude oil edged 0.1% lower to $97.35 per barrel.

The final reading for Euroland’s manufacturing purchasing managers index, 54.0 in January, was 0.1 points above the flash estimate, 1.3 points better than December’s score and represents the fastest expansion rate since May 2011.  Within the common currency area, the German reading of 56.5 was also at a 32-month high, while those for Greece of 51.2 and Spain of 52.2 were at 65- and 45-month peaks.  The French reading of 49.3 was a half-point better than its preliminary estimate and at a 4-month high.  Austria’s 54.1 was unchanged from the December reading although solidly above the 50 level that separates expansion from contraction.   Italy’s 53.1 and Ireland’s 52.8 were at 2-month lows, and the Dutch reading of 54.8 was down from December’s 32-month peak of 57.0 but still well above 50.

Britain’s manufacturing PMI settled back a half-point to 56.7, a three-month low but still very robust.  Domestic demand growth accelerated.

Among the East European PMI-manufacturing surveys published today, Poland’s index rose 2.2 points to 55.4, best since January 2011.  The Czech index increased 0.7 points to a 33-month high of 55.4, and Hungary’s index leaped 7.4 points to 57.9, best since March 2007. Russia’s 48.0 reading was below 50 for a sixth straight time and the lowest score since mid-2009. Turkey’s 5-month low of 52.7 was down from 53.5 in December and a 32-month high of 55.0 in November.

Norway’s PMI score was 52.8, a shade better than forecast and 1.4 points above December’s reading. Denmark short a 56.3, up 2.6 points on the December reading.  The Swedish PMI improved 4.2 points to 56.4, and the Swiss PMI reading of 56.1 was 1.1 points higher than in December. 

Australia’s purchasing managers index fell 0.9 points to 46.7, signaling the fastest rate of decline in manufacturing since last August.

Among the Asian PMIs that were reported other than the aforementioned Chinese results, Indonesia’s edged up 0.1 point to 51.0 and was the fifth reading of at least 50 in a row.  India’s 51.4 was a 10-month high, and South Korea’s reading of 50.9 was at an 8-month peak.

Turkish PPI inflation accelerated sharply to 10.7% in January from 7.0% in December, while CPI inflation of 7.5% was up from December’s 7.4%. 

Australian building permits slumped 2.9% in December but were 21.8% greater than at end-2012.  Expected inflation in Australia slid to 2.5% in January from 2.7% in December.

Japanese motor vehicle sales posted a better 27.5% on-year advance in January after a 12-month increase of 18.7% in December. 

The British Hometrack house price index edged 0.3% higher on month in January and was 4.8% higher than a year earlier.

Investors await the ISM report on U.S. manufacturing in January.  The Reserve Bank of Australia makes an interest rate pronouncement late today.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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