China data disappoints after growth in the U.S. fell to 2.6%

The most important economies in the Asian region (China, Japan, South Korea and India) seem to share a number of problems while some macroeconomic indicators seem to make a difference. The official PMI, which is biased towards large Chinese factories, was published down to 49.8 points, below the critical threshold of 50 points, revealing the start of a contraction episode for the factories. Early this morning the HSBC/Markit Purchasing Managers’ Index (PMI) also declined to 49.7 points keeping its value under 50 points for the second consecutive month. These figures worse economic prospects and lead to the presumption that the People’s Bank of China needs to add more stimulus by cutting the reserve requirement ratio and the deposit rate.

Japan lowered its prospects for the inflation target of 2%, even if the country is currently working under a massive stimulus program. The Final Manufacturing PMI was reported up to 52.2 points, but this value remains fragile in an environment where demand is decreasing and supply is increasing. The Japanese yen was favored by market participants at the beginning of the trading session, but along the way the demand increased for the American dollar.

Keeping quite the same geographical area in Australia the AIG Manufacturing Index was reported up to 49 points, the MI Inflation Gauge raised to 0.1% while the Commodity Prices Index was published to -20.4%. Both the Aussie and the New Zeeland dollar lost ground because of the weak reports from the “engine” of the Asian economy.

The Reserve Bank of India has already cut its interest rate to 7.75% while its manufacturing activity continues to grow as the PMI index remains above the threshold of 50 points. In South Korea, the PMI has also returned to expansion as imports improved.

At the last monetary policy meeting, the Chairman Janet Yellen increased prospects for growth, defining the US economy as having “solid” growth while jobs growth now seen as “strong”. These data seem to sustain an interest rate increase this year if we were to ignore the quarterly GDP which was reported down to 2.6%. It’s true, the overall picture looks like a rate hike would fit the picture, but if we were to look into the details we would better wait a little bit more.

The currency pair EURUSD is following a descending path since January 27^th and is currently trading under the 1.1300 resistance level. Prospects remain negative for the European currency.

The oil price surge on Friday after U.S. unions called a refinery strike and market participants have increased their buying positions. Oil WTI reached the 48.33 resistance level while Brent advanced to 53.06 points, movements that seem to reinforce a growing trend. On the short-term prospects remain unreliable as neither the United States nor the OPEC group is modifying its supply.