Asia Kicks Off 2014 Mixed As China’s PMI Disappoints

Asian and Pacific Rim market were mixed on the first trading day of 2014. Liquidity levels were low thanks to the holiday period and China’s PMI came in weaker than expected.

The first piece of data for 2014 was the HSBC PMI out of China. It showed that China’s manufacturing, for the month of December, came in at a three month low. This comes after the official government number, on Wednesday, also came in lower than expected. This is confirming that the world’s second largest economy lost momentum in Q4 2013.

We were very shocked with the new export numbers which contracted, not only for China, but for Korea as well. The trade cycle is simply not firing on all cylinders right now and there is lag thank to the continued stagnation in the global economy.

STOCKS

U.S. markets closed 2013 with record setting numbers. The S&P 500 posted its largest annual gain in over 16 years. The Dow Jones had its biggest annual gain in 18 years.

The Dow Jones was up over 26.5 percent for the year after closing out 2013 with another record high at 16,576.66. The S&P 500 was up 29.6 percent for the year, as it rose 7.30 points to close at 1,848.36. This was also its fourth monthly gain in a row. Meanwhile the Nasdaq Composite also had a very impressive year. The tech laden composite was up 22.39 points to close at 4,176.59. For the year the NASDAQ gained 38.2 percent. This was its best year since 2009.

In Asia, this morning, the Shanghai Composite is down 0.4 percent. Investors are worrying about liquidity after five new companies received the okay to list their shares on the exchange. This signals the end of the yearlong freeze on new issues, also called IPOs. This is good news, but also concerning as investors are wondering where the capital will come from to fund these new equity purchases.

The South Korean Kospi opened 2014 on a sour note as it is down 1.4 percent. This is a new two week low after the exchange was delayed one hour before opening. A weak yen is worrying exporters, PMI data missed the mark but manufacturing data hit a seven month high for December.

The ASX 200, in Australia, is up 0.4 percent at a new five week high. Investors are getting support from mining companies as copper is near a four month peak.

CURRENCIES

EUR/USD (1.3778) fell after spiking to 1.39 as it hit stiff resistance near 1.40. We are now slightly higher, to kick off 2014, and testing resistance at 1.38. A break there sees 1.3830. We need to climb back to 1.39 and close above to really see a nice rally.

USD/JPY (105.243) is once again climbing higher to challenge 105.50. We are within reach of the five year high at 105.41 and our target of 109 remains valid. We see weakness setting in only if we fall below 103.50.

GBP/USD (1.6571) is within site of the seven year high of 1.6578. While above 1.62 we will continue to see rallies to 1.67 and 1.6750. We get weakness with a fall below 1.6350.

COMMODITIES

Copper (3.408) is continuing to advance and has now hit a four month high. While above 3.40, especially on a daily close, we are bullish again and are now targeting 3.45/48 area.

Gold (1222.00) is above 1220, however while below 1225 we remain bearish here. We could dip back towards 1180.

WTI Crude (98.67) continues to dip. The resistance at the 100 DMA is holding nicely and we can consolidate from 98.60 towards 100.70 for some time. A break there can target 101.00.

TODAY’S OUTLOOK

2014 kicks off with and economic data bang.

Today the U.S. will release jobless claims at 8:30 EST, manufacturing PMI at 9:00 EST, ISM manufacturing at 10:00 EST and construction spending at 10:00 as well.