China manufacturing continues to remain weak

Today’s Economic events

• Australia AIG manufacturing index 51.5 vs. 51.9 previously
• Australia MI inflation gauge m/m 0.40% vs. 0.20% previously
• China non-manufacturing PMI 53.5 vs. 54.4 previously
• China manufacturing PMI 49.4 vs. 49.6
• China Caixin manufacturing PMI 4 vs. 48.1
• Japan final manufacturing PMI 52.3 vs. 52.4
• Australia commodity prices y/y -25.80% vs. -22.70%
• Spain manufacturing PMI 55.4 vs. 52.5
• Switzerland manufacturing PMI 50.0 vs. 51.0
• Italy manufacturing PMI 53.2 vs. 54.9
• France final manufacturing PMI 50.0 vs. 50.0
• German final manufacturing PMI 52.3 vs. 52.1
• Eurozone final manufacturing PMI 52.3 vs. 52.3
• UK manufacturing PMI 52.9 vs. 51.8
• UK mortgage approvals 70.8k vs. 70k
• US Core PCE Price Index m/m 0.00% vs. 0.10% y/y 1.40% vs. 1.40%
• US Personal spending m/m 0.0% vs. 0.10%
• US Personal Income m/m 0.30 vs. 0.20%

Coming up

• Canada Manufacturing PMI
• US Final manufacturing PMI
• US ISM manufacturing PMI
• The US Construction spending
• US ISM manufacturing prices
• ECB President Draghi speech
• FOMC Member Fischer speech

The markets opened the first trading day of the month with China’s PMI numbers in focus. Official data released earlier today showed manufacturing activity in the world’s second-largest economy contracted at the fastest pace in more than three years, in the month of January. The data underlined the weakness as the PMI’s fell to 49.4, marking a sharp fall after falling to 49.2 previously in August of 2012. The data also showed the sixth month of consecutive contraction in the manufacturing sector. Being one of the global drivers of growth, China has seen a sharp slowdown with the GDP rising 6.90% in 2015, one of the lowest rate of growth.

The markets, however, remained muted to the data. It was January’s PMI numbers from China which started off a market sell-off leading to the Yen posting strong gains on risk aversion. Today was, however, different after the Bank of Japan introduced negative interest rates last Friday although a modest risk aversion continues to prevail.

In Asia, equity markets were mixed with the Nikkei225 closing with 1.98% gains while the Shanghai Composite fell -1.77% for the day. Economic data from Asia, besides China PMI numbers, included Australia’s manufacturing index which fell to 51.5 from 51.9 previously, while MI inflation gauge ticked higher to 0.40%, up from 0.20% previously. The Australian dollar was, however, trading weaker as with most commodity currencies. AUDUSD was trading lower, down -0.14% for the day following through Friday’s declines. NZDUSD is also down -0.16%, trading at 0.646 at the time of writing.

The Yen was trading mixed across the board but managed to book modest gains of 0.14% at the time of writing. USDJPY was trading at 121.25 and has been trading sideways since the Asian trading session, caught between the day’s high at 121.44 and 121.08.

[Tweet “Benoit Coeure: ECB will review and possibly revise QE measures in its March policy meeting”]

In Europe, the markets were busy with the various PMI numbers from Eurozone. Overall, Eurozone manufacturing PMI came out at 52.3 matching estimates. The Euro was trading mostly flat for the day. ECB officials hit the news wires with Coeur noting that the Central Bank was ready to play its part within its mandate. He noted that “ECB will review and possibly revise QE measures in its March policy meeting”. The Euro did not react much to the comments after initially pushing lower to post an intraday low near Friday’s lows of 1.082. For the day, EURUSD is up 0.39% ahead of ECB’s Draghi’s speech later this evening, which could be key for further bias in the currency pair.

In the UK, manufacturing PMI started off on a stronger note, rising to 52.9 from 52.1 in December. However, export orders declined along with a cut in payrolls from businesses for a fourth straight month. The Pound initially surged on the headlines but soon eased back. GBPUSD is up a modest 0.36% for the day and is trading near 1.429 after posting an intraday high to 1.4313. European equity markets are all trading in the red, with the German DAX down -1.20% while the London FTSE100 is down -1.22% for the day.

In the US, economic releases included the Core PCE which stayed flat at 0.0% for the month, while staying unchanged at 1.40% on an annualized basis. Personal spending was also flat, at 0.0% while personal income posted modest gains of 0.30% for the month. The Dollar was trading unchanged as more economic data is expected later in the evening including the all important ISM manufacturing PMI and ISM prices. US equity futures are pointing to a weak start after rallying on Friday. Dow Jones futures are down -0.67% for the day while the S&P500 index futures are down -0.76%.

On the commodities front, Gold is up 0.28% posting steady gains since the market open. Prices briefly tested highs of $1124 before easing back to currently trade at $1120 an ounce. Oil prices are once again trading lower, down by over -3.0% for the day. Crude Oil futures for March delivery was seen trading at $32.32 a barrel after prices topped out near $34 on Friday. USDCAD, tracking Oil’s losses is currently up 0.20% for the day trading at 1.40.