China’s Flash PMI Hits 6 Month High

Asian markets had a mixed day. Investors received better than expected PMI data out of China. Still volumes were very thin as the Japanese financial markets we closed for a public holiday.

Today China release the HSBC/Markit Flash PMI which has now hit a six month high at 51.2. This was above August’s high of 50.1 and was up thanks to domestic and foreign demand for goods and services.

Looking at all the components that go into the PMI reading you are seeing a lot of new orders. This indicates we will be seeing more growth surprises out of China maybe into the Year’s end if not into next year..

STOCKS
China’s benchmark, the Shanghai Composite rose 0.4 percent today. It did hit a one week high during trading. The Shanghai was closed last week on Thursday and Friday for a public holiday. The Kospi was also up 0.4 percent as it rose from losses. At one point it was below 2,000 and at its lowest point since September 13.

The Australian S&P/ASX lost 0.4 percent after coming back from some early losses. The rise was thanks to the Chinese data (see above) and coincided with a rise in the Australian dollar which was up 0.3 percent against the Buck. Gold miners were down heavily as the precious metal steadied. It was down over 3 percent on Friday.

U.S. markets have now erased any gains made after the surprise announcement from the Fed last week. The Dow Jones and other markets are uncertain over the economic health if the world’s largest economy. This has spooked the markets.

The DJIA lost more than 180 points. However the Dow posted an all-time high on Wednesday and is up for the week. Both the S&P 500 and NASDAQ Composite sold off sharply on Friday.

Blackberry (NASDAQ: BBRY), the embattled maker of smartphones, tumbled nearly 20 percent at one point closing down 17 percent. Second quarter results were extremely disappointing which has led the company to slash 2,500 jobs. This is 40 percent of its workforce as it struggles to restructure and become profitable.

CURRENCIES
The AUD/USD (0.9420) was up on strong Chinese PMI data we are stable here with good support at this level. We could now test 0.9450 then 0.9500. Please see the chart below.

\The EUR/USD (1.3525) is trading steady in a consolidative pattern. It has moved up well against the dollar after Angela Merkal won elections in Gemrnay. We could now test 1.3600 then 1.3700. The GBP/USD (1.6017) has been rising nicely but faces strong resistance at 1.6050 which could cap gains bringing consolidation then a fall on profit taking towards 1.5900.

COMMODITIES
Metals have been declining even though China’s PMI was strong.

Gold (1322.40) was down after the FOMC announcement that a small reduction in the asset purchase program could happen next month. Resistance at 1375 is holding which means we are targeting 1300.00.

Copper (3.2735) has fallen but is now consolidating as we see resistance at 3.40. WTI Crude (104.77) fell sharply after Russia blocked and UN threat to Syria.

TODAY’S OUTLOOK
We will see markets reacting to several Fed announcements that a small taper can happen next month. There is much uncertainty regarding the overall health of the U.S. economy out there as data has been softening. We also have a looming debt threshold crisis looming.

Markets are now susceptible to event risk, especially data and this week is data heavy from U.S. Mortgage applications to durable goods. On Thursday, we see the U.S. GDP number as well as pending home sales and jobless claims. Then on Friday we get consumer sentiment numbers. Any of these can move the markets in wide movements. Buckle up.