Comment: China Manufacturing PMI at a 5-month High, Positive PMI Surveys Across the Euro-zone
May 22, 2014 6:43 am
Global stock markets are staging a mild rebound following dovish Federal Reserve meeting minutes and better than expected PMI numbers out of China, boosting appetite for risk. Industrial metals and commodity linked currencies are trending higher while safe haven assets like core government bonds are ticking lower.
Wall Street’s rally in the previous session left the S&P500 trading near record highs following the release of Fed meeting minutes showing that the central bank expects inflation to remain well below 2%, with some FOMC members suggesting beefier forward guidance to communicate impeding rate increases next year.
The minutes are being welcomed by market participants as the rate of inflation in the US doesn’t appear to be a worry while the labour market itself continues to improve – indeed, later in the session, we have US jobless claims in which we will get further insight into the health of the American labour market.
Overnight in Asia, data compiled by HSBC shows that purchasing managers’ index for May rose to a five month high of 49.7, better than market expectations and only 0.3 points shy of the 50 mark which signifies expansion – below 50 is contraction. PMIs were driven by a rebound in exports and improvement in new orders. This is a decent showing from China following months of weak macroeconomic data for the world’s second largest economy. Turbulence is still expected for the Chinese economy but today’s data suggests that perhaps the slowdown in China could be reaching a bottom and from here on now, we could see the economy start to build momentum.
Elsewhere in Asia, Tokyo’s Nikkei 225 jumped 2% after data showed manufacturing conditions had stabilised after the April 1 sales tax increase from 5% to 8%.The yen meanwhile decreased as it has an inverse relationship with the Nikkei index. The US dollar is currently trading a little higher while the euro currency is broadly steady following the spate of PMI surveys across the euro zone.
Euro zone PMIs reaffirm the recovery in play in the region with Markit PMI flash surveys in line with estimates at 53.9, staying above the 50 mark and down only a touch from the previous month figure of 54.0 – a welcome result in the eyes of a worried market in which investors are unsure the European Central Bank will meet or exceed expectations next month with stimulus measures.
The services sector is performing better in the euro area, up to 53.5 from 53.1, while manufacturing is faring less well, moving down to 52.5 from 53.4. That being said, the reading is still an increase in the surveys measure of new orders to its highest since May 2011, enjoying its best spell of growth for three years. GDP looks set to rise by 0.5% in Q2 as such – disinflationary pressures persist so the focus is now on the ECB to see how they intend to make use of their war-chest.
Elsewhere, easing tensions surrounding the Ukraine crisis help push down oil prices as Russia attempts to de-escalate the situation by pulling troops back, but that said, there’s a fair bit of hesitation in markets ahead of the May 25 election in Ukraine.
Global stock markets are staging a mild rebound following dovish Federal Reserve meeting minutes and better than expected PMI numbers out of China, boosting appetite for risk. Industrial metals and commodity linked currencies are trending higher while safe haven assets like core government bonds are ticking lower.
Wall Street’s rally in the previous session left the S&P500 trading near record highs following the release of Fed meeting minutes showing that the central bank expects inflation to remain well below 2%, with some FOMC members suggesting beefier forward guidance to communicate impeding rate increases next year.
The minutes are being welcomed by market participants as the rate of inflation in the US doesn’t appear to be a worry while the labour market itself continues to improve – indeed, later in the session, we have US jobless claims in which we will get further insight into the health of the American labour market.
Overnight in Asia, data compiled by HSBC shows that purchasing managers’ index for May rose to a five month high of 49.7, better than market expectations and only 0.3 points shy of the 50 mark which signifies expansion – below 50 is contraction. PMIs were driven by a rebound in exports and improvement in new orders. This is a decent showing from China following months of weak macroeconomic data for the world’s second largest economy. Turbulence is still expected for the Chinese economy but today’s data suggests that perhaps the slowdown in China could be reaching a bottom and from here on now, we could see the economy start to build momentum.
Elsewhere in Asia, Tokyo’s Nikkei 225 jumped 2% after data showed manufacturing conditions had stabilised after the April 1 sales tax increase from 5% to 8%.The yen meanwhile decreased as it has an inverse relationship with the Nikkei index. The US dollar is currently trading a little higher while the euro currency is broadly steady following the spate of PMI surveys across the euro zone.
Euro zone PMIs reaffirm the recovery in play in the region with Markit PMI flash surveys in line with estimates at 53.9, staying above the 50 mark and down only a touch from the previous month figure of 54.0 – a welcome result in the eyes of a worried market in which investors are unsure the European Central Bank will meet or exceed expectations next month with stimulus measures.
The services sector is performing better in the euro area, up to 53.5 from 53.1, while manufacturing is faring less well, moving down to 52.5 from 53.4. That being said, the reading is still an increase in the surveys measure of new orders to its highest since May 2011, enjoying its best spell of growth for three years. GDP looks set to rise by 0.5% in Q2 as such – disinflationary pressures persist so the focus is now on the ECB to see how they intend to make use of their war-chest.
Elsewhere, easing tensions surrounding the Ukraine crisis help push down oil prices as Russia attempts to de-escalate the situation by pulling troops back, but that said, there’s a fair bit of hesitation in markets ahead of the May 25 election in Ukraine.
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