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ETX Capital Daily Market Bite, 3rd February 2014: European Markets Hesitant; PMIs In Focus
February 3, 2014 9:53 amVideo
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February 3rd 2014, Daily Market Bite from Ishaq Siddiqi Market Strategist.
Trepidation in European equity markets on first trading day of the month as investors in the region await PMI manufacturing data out of the euro zone, UK and the US. The euro zone PMIs should confirm an encouraging picture of manufacturing activity in the region since the start of the year. Stronger business confidence out of Germany is likely to drive the growth in the broader EMU PMIs with improving conditions in Spain likely to add — markets look for a reading of 53.9 in January.
Spanish PMIs were better than expected, in at 52.2 last month versus consensus at 51.5 and the prior reading of 50.8. At the same time, UK PMI manufacturing data, due after the euro zone release, should show further gains in the country’s manufacturing activity as data out of the industrial sector last month showed upbeat signs of improvement.
Both the UK and EMU releases will be eagerly eyed by the market ahead of this week’s BOE and ECB policy meetings in which both central banks are expected to offer beefed up forward guidance. The ECB is also expected to cut the refi-rate again in the face of falling inflation however the market remains divided, unsure that the ECB will make the move just yet. Later from the US, we have the ISM manufacturing report which is expected to show weakness given the severe weather conditions last month. We also have construction spending data out of the US which will be scrutinised too.
Overnight, the rout in EMs continued on the back of slowing data out of China as the country’s PMI manufacturing report continued to deteriorate last month. Despite the weakness being widely expected, traders were taking no chances and continued to dump EM assets in favour for riskier investments. Japanese markets felt the pressure with the Nikkei 225 index now the worst performing major global index after last year’s bumper gains. Japanese equities are feeling the pressure of external factors including the Fed’s tapering measures, slowing China growth and subsequent fallout of the EM deterioration which has left investors adjusting asset portfolios — Japanese equities are one of the more vulnerable assets.
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