A British PMI Surprise and Trump Sticks It to Mexico

September 1, 2016

The British manufacturing purchasing managers index rebounded sharply from a 41-month low of 48.3 in July to a 10-month high of 53.3 in August. Brexit fears are receding either because a favorable reassessment of its near-term threat or because of confidence the macroeconomic stimulus will amply counter Brexit’s drag.

Sterling advanced 0.8% against the dollar overnight. The dollar otherwise is little changed, firming 0.2% relative to the yen and 0.1% versus the loonie, euro and Swissie but dropping 0.2% against the Aussie dollar and 0.1% vis-a-vis the kiwi. The yuan is flat.

The 10-year British gilt yield jumped four basis points, reversing its net drop in August. 10-year Japanese JGB and German bund yields firmed two and 0ne basis points, respectively.

Stocks in Europe advanced 1.8% in Spain, 1.6% in Italy, 1.0% in France, 0.7% in Greece, and 0.5% in Germany but only 0.1% in Britain thus far. In the Pacific Basin, share prices fell 1.0% in Indonesia, 0.8% in Taiwan, 0.7% in China, 0.3% in Australia and 0.2% in India but advanced 0.4% in New Zealand and 0.2% in Japan and Hong Kong.

Score a diplomatic victory for Donald Trump in his meeting yesterday with Mexican President Enrique Pena Nieto. Trump didn’t water down his wall demands and accusations, and Nieto’s standing with his countrymen took a big hit.

Oil and gold are 0.2% and 0.1% softer at $44.63 per barrel and $1,309.80 per ounce.

Euroland’s manufacturing PMI slipped 0.3 points to a 3-month low in August. The Spanish PMI stayed at July’s level, a 31-month low of 51.0. Italy’s PMI sank 1.4 points to a 20-month low of 49.8. Austrian and German PMI readings of 52.1 and 53.6 were each 3-month lows but higher than most other reporting Ezone members. France’s 48.3 was at a 2-month low and the sixth sub-50 score in a row. Ireland’s 51.7 edged up slightly but remains well much weaker than it had been. Greece’s PMI had slumped 1.3 points in July but returned to the June level of 50.4 in August, suggesting flat activity. The Dutch reading of 53.5, a 5-month high, was the most encouraging report of the bunch.

Three Chinese PMI surveys were reported for August, two by the government and one by Caixin. The government’s manufacturing PMI rebounded 0.5 points to 50.4, a four-month high. But the Caixin-compiled manufacturing PMI fell 0.6 points to 50.0, a 2-month low. The government’s non-manufacturing PMI slipped 0.4 points to 53.5 to a 3-month low.

Japan’s manufacturing PMI edged 0.2 points closer to the 50 no change threshold, printing at a 6-month high of 49.5.

In other PMI releases for economies in the Pacific Rim,

  • South Korea’s index dropped 1.5 points to a 12-month low of 48.6.
  • Vietnam’s factory PMI rose 0.3 points to a 2-month high of 52.2.
  • The Filipino reading of 55.3 was a point lower than in July and at a 5-month low.
  • The Thai PMI increased 0.5 points to a 4-month high of 49.8, implying near stagnation nonetheless.
  • Taiwan’s PMI rose 0.8 points to an 18-month high of 51.8.
  • Malaysia’s 47.4 reading was a 2-month low after July’s 4-month high of 48.1.
  • Indonesia shot a 50.4, 2 points higher than July’s sub-50 reading.
  • India posted a 13-month high of 52.6, and the survey revealed lessening inflation.
  • Among the most dismal findings came from Australia, whose manufacturing PMI plunged almost 10 points to a 14-month low of 46.9.

In other Australian news, retail sales were unchanged in July and 2.7% higher than a year earlier.  Australian capex business spending dropped 5.4% on quarter in 2Q and plunged 17.4% on year.

New Zealand’s terms of trade (export/import price ratio) fell 2.1% last quarter, reversing half the rise seen in 1Q.

South Korean CPI inflation slowed unexpectedly to 0.4% last month from 0.7% in July. The Thai and Indonesian inflation rates in August were 0.3% and 2.8%. Thai producer prices were 0.4% lower than in August 2015.

Japanese motor vehicle sales posted a 5.7% on-year advance in August.  Stock and bond transactions generated a 177 billion net yen capital outflow last week and an outflow of JPY 48 billion the previous week.

The Central Bank of Brazil left its Selic interest rate unchanged at 14.25%, the level since an increase in July 2015.

Colombia’s central bank, which engineered a series of rate hikes from last September through July of this year, kept the rate unchanged at 7.75% after the August policy meeting, but their was one dissenting vote in favor of tightening again.

Among other European PMI releases,

  • Russia’s manufacturing PMI rebounded 1.3 points to a 2-month high of 50.8.
  • Turkey’s index climbed 0.7 pints to a 2-month high of 48.7.
  • Poland also scored a 2-month high of 51.5 after a 22-month low in July of 50.3.
  • The Czech PMI rose from 49.3 in July to a 2-month high of 50.1 in August.
  • The Swiss PMI improved 0.9 points to a 2-month high of 51.0.
  • Sweden’s PMI in manufacturing was 50.7. That was down from a 6-month high in July of 55.4 and the lowest result in over two years.
  • Norway’s 50.8 reading was a 4-month low.

U.S. productivity, manufacturing PMI, unit labor costs, auto sales and weekly jobless claims arrive today.

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




Comments are closed.