Summits and Manufacturing PMI Releases

November 1, 2021

All Saints Day 2021 marked the end of one summit and start of another and the release of manufacturing purchasing manager surveys for a number of economies.

In overnight market action,

  • Equities rallied 2.6% in Japan, over 1% in India, and so far between 0.8% and 1.2% in Germany, France, Italy and Spain. U.S. stock futures are up 0.5%. Solid 3Q corporate earnings have been supportive.
  • Inflationary pressures were highlighted in the PMI reports, and the Fed on Wednesday is expected to take further steps toward winding down quantitative stimulus. Policymakers at the Bank of England, who also are reviewing their stance this week, have been increasingly hawkish in their rhetoric. Ten-year sovereign debt yields kicked off November with gains of five basis points in Italy where the Group of Twenty summit was held as well as three basis points in the U.S., U.K. and Spain, and two basis points in Germany and France.
  • Prices for WTI oil and gold on the Comex are 0.5% and 0.2% firmer.
  • The dollar overnight rose 0.3% against the yen, Australian dollar, and sterling but dipped 0.2% versus the kiwi and 0.1% relative to the euro, Swissie, and yuan. The weighted DXY dollar index treaded water a mere 0.4% below its 52-week high.

The Group of Twenty leaders summit in Rome issued a statement that characterized the economic recovery as “highly divergent across and within countries” and pledged to avoid premature withdrawal of support measures. It also pledges to meet price stability mandates “while looking through inflation pressures where they are transitory and remaining committed to clear communication of policy stances.” Putin of Russia and Xi of China were conspicuously missing from the summit. A U.S. sponsored mutual pledge favoring a global minimum tax was endorsed, and the possibility of resumed nuclear talks with Iran was hinted. Despite all the talk, however, detailed goals were not nailed down in key areas like vaccinations and climate change. Diplomatic attention now moves on to the Climate Change conference in Glasgow.

Lower house parliamentary elections in Japan yesterday handed the ruling Liberal Democratic Party and Prime Minister Kishida a clear majority of seats, albeit slightly fewer than previously held. This should clear the was for more fiscal stimulus as Japan lately has trailed the U.S. and European economic recoveries.

That said, Japan’s manufacturing purchasing managers index for October got revised up 0.2 index points to a six-month high reading of 53.2 but with input and output inflation hovering around 13-year high points.

Reported PMI manufacturing results elsewhere in the Pacific Rim revealed a 6-month high in Malaysia and Thailand, an 8-month high in India, a 5-month high in Vietnam, a 4-month high in the Caixin-compiled Chinese measure, a record high in Indonesia, but a 13-month low in South Korea. All of these reading were above the 50 threshold that separates improvement for deterioration. China’s government-compiled NBS manufacturing PMI of 49.2 and non-manufacturing PMI of 52.4 were each below expectations and at 20-month and 2-month lows. Australia’s AIG-collected manufacturing PMI dropped 0.8 points to a 1-year low of 50.4 in October, while the Australian CBA-compiled manufacturing PMI rose 0.9 points to a 4-month high of 58.2.

Several key continental western European purchasing managers indices for manufacturing are not being released until tomorrow due to the All Saints Day holiday.

The British PMI of 57.8 was 0.1 point above its preliminary estimate and 0.7 points above September’s 7-month low.

The Swiss manufacturing PMI dropped 2.7 points to an 8-month low of 65.4. The Norwegian PMI of 58.3 was at a 5-month low, and Sweden’s measure fell 0.2 points to a 2-month low of 64.4. But the Danish PMI exceeded 70 and represent’s that data series’ record high. Russia scored a 5-month high of 51.6. Greek and Dutch PMI scores of 58.9 and 62.5 were each at 2-month highs, but the Czech and Turkish readings were at 11- and 5-month lows.

In other released data thus far today, German retail sales volume unexpectedly plunged 2.5% on month in September. While still 3.7% above the pre-pandemic level 19 months earlier, sales in September were down 3.1% compared to March and 0.9% versus September 2020.

Real GDP in Hong Kong only rose 0.1% on quarter during 3Q 2021 after  0.9% contraction in the second quarter. The year-on-year growth rate slowed to a weaker-than-forecast 5.4% from 7.6% in 2Q and 8.0% in the first quarter.

CPI inflation in Indonesia accelerated to a 5-month high of 1.67% in October, and core inflation of 1.33% was marginally above September’s on-year advance.

Greater on-year growth in South Korean imports than exports resulted in a reduced $1.69 billion trade surplus in October versus $5.72 billion a year earlier.

The Central Bank of Colombia‘s policy interest rate was lifted by a greater-than-anticipated 50 basis points to 2.5%. An initial 25-basis point increase occurred in September. After the pandemic hit in 2020, the rate was slashed from 4.25% to 1.75% in seven incremental moves. Some of the other central banks to raise interest rates since the end of this year’s third quarter include those in Romania, Iceland, Chile, Kazakhstan, Tajistan, Jamaica, Poland and New Zealand.

PMI surveys for the United States, Brazil, Mexico, and Canada will be released a while later.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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