Some Better PMI Results but Investor Mood Stays Guarded

April 6, 2016

Stocks in the Pacific Rim fell 1.7% in Taiwan and 0.1% in Japan and China but rose 0.4% in Australia, South Korea and Singapore.

Share prices in Europe are mixed, with rises of 0.6% in the U.K. and Switzerland, 0.7% in Italy and 0.3% in France and Spain but drops of 0.7% in Greece and 0.2% in Germany.

The dollar rose overnight by 0.9% against sterling, 0.5% relative to the Swiss franc, 0.4% against the euro, 0.2% vis-a-vis the loonie, and 0.1% against the yen, Aussie dollar and Chinese yuan.  The dollar is 0.5% softer against New Zealand’s currency.

The 10-year British gilt edged up a basis point, and the 10-year Japanese JGB is a basis point lower.  German bunds are steady.

A report out of Kuwait that an oil production freeze might be possible without Iranian participation, which contradicts the Saudi position, helped West Texas Intermediate crude to recover 3% to $36.96 per barrelComex gold fell 0.7% to $1,222.96 per troy ounce.

Cruz and Sanders won the Wisconsin primaries with 48.3% and 56.5% of the vote there.  Cruz collected 33 of 36 Republican delegates and putting the overall delegate count at 739 for Trump (59.7% of the total needed for the nomination) to 502 for Cruz.  Sanders got 45 delegates, but Clinton took 31, extending her total including super-delegates to 1,743 or 73.1% of the number to win the nomination.  Next up is the New York primary where Clinton and Trump are running well.

China’s Caixin service-sector and composite purchasing manager indices increased 1.0 and 1.4 points to respective 8- and 11-month highs of 52.2 and 51.3 in March.  Senior Bank of Canada Deputy Governor Carolyn Wilkins predicts an average growth in China of 6% over the coming 15 years, enough to double that economy’s size in a dozen years.

India services PMI rebounded 2.9 points in March to 54.3, matching a joint 21-month peak also touched in January.  India’s composite purchasing managers index climbed 3.1 points to a 34-month high.

Sweden’s services PMI increased 1.6 points to a 2-month high of 53.3 in March. 

After setting record lows in February, Brazil’s services and composite PMI readings bounced up 1.7 and 1.8 points but still highlighted rapid rates of contraction with scores of only 38.6 and 40.8 in March.

The German retail purchasing managers index jumped 1.6 points to a 7-month high of 54.1 in March.  Germany’s construction PMI, although down 3.8 points from February to a 3-month low of 55.8, continued to reflect rapid growth in that sector. 

The global PMI recovered a half-point to 51.3 in March after hitting a 40-month low in February.  The services PMI for the world also rose 0.5 points and remained above the 50 no change level.

Not all PMI news was improved, however.

  • Euroland’s retail PMI fell 0.9 points in March and, at 49.2, was below the 50 threshold for the fourth time in five months.
  • France’s and Italy’s retail PMIs set 11- and 13-month lows of 45.5 and 46.6.
  • Hong Kong’s private sector PMI dropped 0.9 points to a 7-month low of 45.5.

In other economic news, Japan’s index of leading economic indicators fell 2.0 points in February to a 38-month low of 99.8.  The index of coincident economic indicators plunged 3.2 points to 110.3, earning a trend designation by officials of “weakening.”

German industrial production slipped 0.5% in February after a 2.3% increase the month before.  January-February output combined was 2.0% greater than the 4Q level, and February recorded a 12-month 1.3% increase.

British new car registrations, a gauge of sales, recorded on-year growth of 5.3% last month after gains of 2.9% in January and 8.4% in February.

British shop prices fell 1.7% on year in March, their fourth on-year decline in fivem months.

The Federal Reserve labor market conditions index printed at -2.1 in March after -2.5 in February, +0.4 in January, +2.3 in December and +2.7 in November.  Fed officials hope to see a return soon to positive readings.

The National Bank of Poland retained a reference interest rate of 1.5%.  The rate was cut by 225 basis points to 2.5% between November 2011 and July 2013.  After a long lull, such was lower by 50 basis points additionally in both January and March 2015 to the present level.

U.S. mortgage applications increased 2.7% last week, as the 30-year fixed mortgage rae fell to 3.86% from 3.94% in the prior week.

Today’s big event will be the release of FOMC minutes from the meeting in mid-March.

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

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