PMI Surveys, Post-Brexit Britain, and Coronavirus Concerns Vie for Market’s Attention

February 3, 2020

The dollar advanced today by 1.5% against sterling and 1.2% against China’s renminbi. The European Union’s lead trade negotiator expressed doubt that a trade deal with the U.K. similar to what Britain shares with Canada can be reached this year. China’s stock market dived 7.7% on the first trading day after the New Year holiday in its worst experience since August 2015. Global cases of the Coronavirus now exceed ten thousand and involve 362 deaths. Beijing officials are blaming the Trump Administration for fanning fear about the virus.

The dollar so far has also risen today by 0.5% against the peso and 0.3% relative to the yen, loonie, and euro, 0.2% vis-a-vis the Swiss franc, and 0.1% against the Australian dollar.

Other Pacific Rim stock markets lost 1.4% in New Zealand, 1.0% in Japan, 1.3% in Australia, 1.2% inĀ  Singapore, and 0.9% in Indonesia. But India’s market went up 0.5%, and European and North American stocks have also trimmed Friday’s losses, with gains of 0.9% in the U.S., 0.8% in the U.K., and 0.5% in France and Germany.

While the ten-year U.S. Treasury yield has climbed 3 basis points, its German and British counterparts are flat.

The price of West Texas Intermediate crude oil plunged 1.9%, and Comex gold shows a price decline of 0.4% so far today.

Hong Kong’s economy was floundering even before the Coronavirus scare. Real GDP there posted a year-on-year contraction of 3.0% in 4Q after -2.8% in the third quarter. Hong Kong GDP on average fell 1.2% last year. Some analysts are postulating that China’s Coronavirus plausibly could depress 2020 GDP growth to less than 5%.

In U.S. political news, Vermont Senator Sanders appears poised to win today’s Iowa Democratic Party Caucus. President Trump will deliver the State of the Union Address tomorrow and will be acquitted Wednesday by the Senate where all Republicans and even some Democrats are expected to reject grounds for his impeachment.

Economic data news today has been dominated by a slew of January manufacturing-sector purchasing manager surveys.

The U.S. ISM-compiled PMI rose 3.1 points to 50.9, as sub-indices for production and new business orders soared by 9.5 and 4.4 points respectively. The IHS-compiled U.S. PMI, in contrast, fell half an index point to a 3-month low of 51.9.

Euroland’s PMI reading in January was still below the 50 level separating expansion from contraction, but at 47.9 such was 1.6 points above December’s level and at a 9-month high. The Irish and Austrian PMIs also marked 9-month highs, and Germany’s score was the best since February 2019. All seven individually reported PMIs from members of the euro area rose between December and January, but four of them remained below the 50 threshold. Orders fell at the slowest rate since late 2018, and business confidence increased to a 16-month high in the Ezone.

Due to lessening political uncertainty, Britain’s manufacturing PMI rose 2.5 points to a 9-month high of 50.0.

Among other West European PMIs, Sweden’s index jumped 3.8 points to a 5-month high of 51.5, but the Swiss reading of 47.8 and Norway’s 50.9 score were at 4- and 6-month lows.

Turning to Eastern Europe, Russia’s 47.9 connoted the slowest rate oaf contraction in five months. Poland’s PMI slid 0.6 points to a 2-month low of 47.4. The Czech reading was at a 7-month high but still mired deeply in a manufacturing recession with a reading of 45.2.

Turkey’s PMI rose 1.8 points to a 22-month high of 51.3.

Australia’s AIG-compiled PMI fell 2.9 points to a 55-month low of 45.5, but the CBA-compiled PMI for Australia rose 0.4 points to a 2-month high of 49.6.

Turning to Asia, Japan’s January manufacturing PMI was revised lower to a 2-month high of 48.8 even though the business outlook sub-index rose to a 17-month high.

China’s PMI fell 0.3 points to a 5-month low of 51.1, whereas India’s PMI reading of 55.3 was 2.6 points above December’s level and close to an 8-year peak. Taiwan’s 51.8 reading was the best in 17 months, and the Filipino PMi improved to a 3-month high of 52.1. However, PMIs for Thailand of 49.9, Indonesia of 49.3, South Korea of 49.8, and Malaysia of 48.8 were each below the expansion versus contraction threshold and each at 2-month lows. Singapore recorded a manufacturing PMI of 50.3, its second reading above 50 in a row and the best score in 9 months.

The Canadian manufacturing PMI edged 0.2 points above December’s 4-month low to a 2-month high of 50.6.

Brazil’s 51.0 PMI reading was also at a 2-month high.

In other economic data reports today,

  • U.S. construction spending unexpectedly fell 0.2% in December.
  • Chinese corporate profits in December were 6.3% lower than a year earlier. For all of 2019, profits dropped 3.3%, marking the first calendar year decline since a decrease of 2.3% in 2015.
  • Building permits in Australia only dipped 0.2% on month in December after soaring 10.9% in November.
  • Indonesian CPI inflation decelerated 0.04 percentage points to a 10-month low of 2.68% in January
  • Turkish CPI inflation increased to a 5-month high in January of 12.15%. The recent low-point was 8.55% in October.
  • Turkish PPI inflation of 8.84% last month also marked a 5-month high.
  • Hungarian PPI inflation in December of 2.4% was 0.3 percentage points higher than in November and a 7-month high.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: , , , ,


Comments are closed.