3 September 2014
Good morning all from the Riviera of the South Pacific (it’s been outlandishly warm and calm for in Wellington for a while now).
# China Non-manufacturing PMI
# Australian Q2 GDP
# China HSBC Services PMI
# RBA Gov. Stevens speaks
# UK Services PMI
# U.S. Factory Orders
# U.S. Beige Book
# European stocks were up by as much as 0.6% early in the session before a bout of nerves ahead of the ECB meeting, and the prospects around more central bank support, took the Stoxx600 back to around par. The Stoxx ended essentially flat down just 0.03%. U.S. stocks meanwhile were generally weaker, although finishing off lows, as dealing rooms come back to work en masse. A super strong U.S. ISM weighed on the market as the data raises the spectre of the Fed moving to raise rates sooner rather than later. Further, the energy sector was a notable weight on proceedings as the S&P energy index fell 1.3%. The broad S&P500 losses were considerably less, the big board ending down just 0.05% (Dow down 0.18%).
# The closely watched U.S. ISM survey of manufacturing showed the sector revved up in August, defying expectations of a slowdown from already high readings. The ISM's manufacturing PMI increased to 59.0 in August from 57.1 in July. The PMI is at its highest level since March 2011. "This is broad-based strength," said Bradley Holcomb, who oversees the survey for the ISM. Economists surveyed had expected the latest PMI to slow to 56.8. Earlier Tuesday, data provider Markit said its own final U.S. PMI jumped to 57.9 last month from 55.8 in July. Output, new orders and employment all gained. The Markit PMI is at its highest reading since April 2010. Both reports can only be described as exceptionally strong.
# U.S. 10 year bond yields surged in response to the ISM data rising 8 basis points to 2.42%.
# The 2 month rally in the USD picked up steam in the last 24 hours, led by a sharp move in USD/JPY in Asia yesterday. The dollar climbed against all major currencies, with the EUR dropping to its lowest point in almost a year, the JPY edging closer to its weakest level of 2014 and the GBP lurching to a 6 month low. The outlook for Fed action is at sharp odds with the other major economies and the move shouldn’t be any real surprise.
# The unofficial but closely watched Markit UK manufacturing PMI survey fell from 54.8 in July to 52.5, its lowest reading in 14 months.
# A poll released overnight showed a surge in support for Scottish independence just weeks before the vote on whether to end the 300-year-old union with the U.K.
# The latest Fonterra GDT auction showed prices falling another 6% dispelling any thoughts that the previous auctions’ result was showing signs of stabilisation. The cumulative decline since early February is now up to 45%. In another measure of NZ’s trade situation, ANZ’s commodity price index fell by 3.3% m/m in August, reflecting falls in dairy prices, offset by gains in beef and aluminium. Overall, though, prices for NZ’s exports sit at a 17-month low. Thankfully the NZD/USD responded now 0.0075 points lower than yesterday’s high.
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