23 September 2014
# China HSBC Flash manufacturing PMI
# Eurozone Flash Manufacturing PMI’s
# U.S. Flash Manufacturing PMI
# Richmond Fed Manufacturing Index
# The overnight session was noteworthy for fallout from mounting concerns over China’s growth potential. With Chinese data having been noticeably soft of late many in the market had been expecting further stimulus measures to emerge from Chinese authorities. However, yesterday China’s Finance Minister Lou Jiwei hosed down that speculation injecting some caution into global markets and sending equities, commodities and the commodity block currencies lower. The EuroStoxx600 fell 0.53%, the Dow fell over 100 points snapping a 5 day winning streak, whilst the S&P500 fell 0.80%.
# Lou noted that China was experiencing stable growth, and that there would not be any major policy adjustments. Not helping the mood was a Reuters article doing the rounds yesterday, which suggested that Chinese leaders would accept growth below target this year, and set a lower target still for 2015. Further Citigroup’s economic surprise index for the country fell from +50 in early August to -41 as of yesterday.
# Worryingly for Australia in particular, Iron ore prices fell 2.3% to $79.80, a fresh 5 year low taking the AUD/USD with it to a 7 month low. The AUD has now fallen 5.6% versus the greenback since Sept. 5.
# U.S. home sales ended a run of 4 months of gains, with the number of previously owned homes sold, falling 1.8% in August. Sales are now down 5.3% from a year earlier. In the detail it’s interesting to note that ‘investors’, who had helped fuel the rebound in recent years, stepped away from the market with that category of buyers falling 12%.
# Speaking to the European parliament ECB chief Draghi said the ECB stands ready to use additional unconventional tools if needed to spur inflation and growth in the euro zone. Draghi said the Governing Council "remains fully determined to counter risks to the medium-term outlook for inflation". "Therefore, we stand ready to use additional unconventional instruments within our mandate, and alter the size and/or the composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation".
# The benchmark U.S 10 year bond yield fell, now back at 2.56% after hitting a 2 month high of 2.64% Thursday. Likewise the yield on the 10-year German government bond fell to 0.967% and the yield on the 10-year U.K. government bond slid to 2.501%.
# The Bloomberg Commodity Index dropped 0.8% extended declines to a 5 year low on the speculation that a stronger dollar and signs of slowdown in China will curb demand for raw materials.
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