Danske Daily: HSBC China Manufacturing PMI Fell To 50.5

Lower-than-expected China PMI pushes Asian equity markets lower.

U.S. equity markets closed with decent gains - S&P500 up 0.5%.

Focus today is on European April PMIs.

Markets overnight
The flash estimate of the HSBC China manufacturing PMI fell to 50.5 in April, well below last month’s reading and analyst expectations. This adds to recent mixed data that have raised concerns about a weak Q2 following the disappointing Q1.

Asian equity markets are lower, led by losses in China. The U.S. market closed with decent gains - S&P500 index up 0.5% - but Chinese growth concerns remain a key driver. While U.S. equity markets have so far not reacted much to increased global growth concerns, the composition of the rally is worth noting, as recent months’ gains have to a large degree been driven by more defensive sectors such as Consumer Staples.

The yen rebounded to below 99 against the dollar and AUD/USD is trading back near 1.02 as commodity prices continue to correct lower. U.S. and Europe Economic data have also been mixed, leaving markets struggling with how to price the risk of another Q2 slowdown in growth and risk markets.

European Commission President Barroso says that European austerity may be near its limit, arguing that ‘for a policy to be successful it not only has to be properly designed. It has to have the minimum of political and social support’. This could be an indication that the commission will ease its pressure for austerity in Europe’s weaker economies. Fiscal tightening in Europe has so far been more growth negative than expected, with fiscal multipliers well above 1.

The announcement that Dep Gov L.E.O. Svensson is leaving the Swedish Riksbank sent the krona temporarily stronger yesterday, but the EUR/SEK corrected back higher again overnight – trading above 8.54 this morning. L.E.O. Svensson has not been able to find support for his very dovish line, and yesterday's market driver was thus an expectation that the board's balance will be shifting in a somewhat more hawkish direction.

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