Having seen the mildly bullish official China manufacturing PMI data yesterday, it was the turn of the HSBC equivalent today. A similar trend was displayed with the index rising to 49.3 in April compared to 48.3 in March (official PMI was 53.3). This compared with the flash estimate of 49.1 a couple of weeks ago. However, it was the sixth straight month of contraction. There was a muted reaction to the data.
Japan’s monetary base continued to contract in April with a 0.3 percent y/y decline, the largest since July 2008. This followed a 0.2 percent y/y decline in March and has in part been attributed to the previous impact of the hefty increase in money supplied in the aftermath of the devastating March 2011 earthquake. As such, and with Japan markets closed for the rest of the week, the data did not trouble markets to any extent.
Australian press reports focused on the RBA 50bp cut yesterday and whether the full impact would be passed on to customers, as the RBA has intended. The big banks have yet to react but Bank of Queensland announced only a 35bp reduction in its lending rates, setting a quasi benchmark from which the major banks are unlikely to deviate. Does this mean the RBA has to do more to achieve the desired effect? OIS markets are pricing in just over 50 percent chance of another 25bp cut at the next meeting.
Mayday holidays across continental Europe subdued activity overnight but there were pockets of activity in those centres that were open. GBP saw mild selling after a weak manufacturing PMI number (50.5 from 51.9 and 51.5 expected) while CAD regained some of Monday’s lost ground as oil prices headed towards $106 p/barrel. AUD/USD managed to find some support above 1.03 after the RBA’s semi-surprise 50bp rate cut, a commendable performance given the uptick in the USD.
In the wake of the weak Chicago PMI on Monday, markets were leaning more towards a weak manufacturing ISM number from the US, but were disappointed. The reading hit a 10-month high of 54.8 from 53.4 last (53.0 expected) with a better performance from the new orders sub-index compounded by lower inventories. Prices paid were also firm at an unchanged 61.0.
The better data saw US Treasury yields back up and this in turn helped lift the USD/JPY back through the 80.0 mark with other USD pairings retreating in due course. Fed speakers reiterated a wait-and-see attitude for further stimulus though dove Williams commented there would be no need for more unless unemployment stays above 8 percent or inflation gets too low.
Data Highlights
- UK Apr. PMI Manufacturing out at 50.5 vs. 51.5 expected and revised 51.9 prior
- US Mar. Construction Spending out at +0.1% m/m vs. 0.5% expected and revised -1.4% prior
- US Apr. ISM Manufacturing out at 54.8 vs. 53.0 expected and 53.4 prior
- US Apr. ISM Prices Paid out at 61.0 vs. 59.0 expected and 61.0 prior
- JP Apr. Monetary Base out at -0.3% y/y vs. -0.2% prior
- NZ Apr. ANZ Commodity Price Index out at -4.5% m/m vs. -1.7% prior
- China Apr. HSBC Manufacturing PMI out at 49.3 vs. 48.3 prior