Mixture of Market Signals as PMIs Provide Some Relief

January 6, 2015

Yesterday’s market volatility continued in some respects.

  • Share prices fell overnight by 3.0% in Japan, 3.1% in India, 2.4% in Taiwan, 1.6% in Australia, 1.7% in South Korea, 1.4% in Singapore and 1.0% in Hong Kong.
  • In U.S. Treasury futures, the 30-year yield slid another two basis points lower to 2.58%, and the 10-year yield of 1.99% is down by four basis points.
  • Ten-year yields on British gilts fell five basis points, and the 10-year Japanese JGB dropped three bps to 0.28%, a new low for the move.
  • West Texas Intermediate oil slumped 1.8% to $49.13 per barrel, bringing the cumulative slide since June 13th to 54%.

However, share prices in Europe have so far recovered 0.5% in Germany, 0.3% in Switzerland and 0.1% in France.  Comex gold rose 0.5%, and the dollar is mixed, unlike yesterday’s broad-based advance that was powered by a flight to safety.  The dollar has depreciated 0.6% against the kiwi, 0.5% versus the Aussie currency, 0.4% relative to the yen and 0.1% vis-a-vis the yuan.  The dollar is also up by 0.3% against the euro and Swissie, 0.2% against the loonie and 0.4% relative to sterling.

The final service sector and composite purchasing  manager index scores for December in the euro area were revised marginally lower compared to their preliminary readings by were nonetheless at 2-month highs of 51.6 and 51.4, respectively.  The data suggest that GDP in the common currency area likely firmed last quarter but by merely 0.1%.

The French and Italian composite PMIs were both below 50 at 49.7 and 49.4, respectively.  Germany’s composite score of 52.0 was at a 2-month high, and Spain’s 54.3 reading also represented a 2-month high.  Ireland (61.0) is the group’s best performing economy.

Japan recorded above-50 readings on its services and composite PMIs of 51.7 and 51.9.  Each result was at a 3-month high, and business expectations improved.

China’s services purchasing managers index of 53.4 also was at a 3-month high, while its composite PMI of 51.4 rose to a 2-month high.  PMI readings below 50 signify contraction; those above that threshold connote expanding activity.  Cost inflation in China fell to a 19-month low.

In India, inflation was also historically low.  India’s services PMI of 51.1 was at a 2-month low, and so was its composite reading for both services and manufacturing of 52.9.

Hong Kong’s private PMI poked above 50 in December for the first time since August but just barely with a score of 50.3.

Non-oil PMI’s of 57.9 in Saudi Arabia and 58.4 in the United Arab Emirates were at 2-month highs.  Egypt’s 51.4 reading was the best score since September.

Brazil’s composite and service-sector purchasing manager indices improved to 3-month highs but remained below the 50 no change threshold at 49.2 and 49.1, respectively.

Norway’s manufacturing PMI slipped under 50 to score a 49.8 in December after readings of 50.7 in October and 51.4 in November.  Norway is sensitive to the collapse in oil prices.

The private-sector South African PMI fell to a 5-month low of 50.2 in December from 50.5 in November and a 22-month high of 52.7 in October.

The British services PMI, like the manufacturing and construction surveys reported earlier, weakened in December, hitting a 19-month low of 55.8 after 58.6 in November.

French consumer confidence climbed unexpectedly to a 30-month high of 90 in December from an upwardly revised November reading of 88.

The Australian A$ 925 million trade deficit in November was the eighth shortfall in a row and 5.5% wider than October’s deficit.

Japan’s monetary base showed accelerated 38.2% on-year growth in November.

Filipino CPI inflation fell a full percentage point in December to 2.7%, while producer prices in the Philippines posted a twice-as-large on-year decline of 0.6% in November versus the fall of 0.3% in the year to October. 

Brazil’s trade balance swung to a $0.29 billion surplus last month from a $2.35 billion deficit in November.

Markets await the release of U.S. factory orders, PMI survey of services, and weekly chain store sales.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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