The first trading day of a new month begins in Europe, but what is not new is the angst amid traders. They still have the same flashlights and the focus remain towards the dawdling growth over in China, frailty in the US economic data which made the Fed to deviate from their hawkish slant and the ongoing worrisome ineffective stimulus efforts by the European Central Bank and the Bank of Japan. However, you cannot say that their stimulus package has not worked, because it was the medicine by the BOJ, which aided the global financial markets to recover some of their wounds during the preceding month.
Today is the day of manufacturing data, and if there is any affair which is mutual between them is a stagnant number no matter which side of the equation you are looking at it. The Chinese manufacturing PMI number fell below the expectations – no surprise there. For some investors it is not the fact that the manufacturing data is in a constant downward spiral, but the worrisome is if the authorities are hiding any major rust behind their wrapping. Although, this is not the chief torment among the mainstream, but it wont be long before we see the domino effect of this if this business continue to pan out the way it is unfolding. Nonetheless, the Chinese economic reading came in at 49.4, nonetheless the silver lining was in the Caxin number which provided some abutment and the print came in at 48.4 against the forecast of 48.1.
The expectations for the manufacturing numbers from Italy, France and Germany are feeble as well. None of this numbers have any optimism baked in them and the data does show that the expectations were skewed correctly, it could cover the markets with its pessimistic blanket. However, the Spanish manufacturing number has played an upbeat music, but the markets are struggling to maintain their gains.
Although, we have seen the remarkable recovery in the oil price during the last month and fundamentals have begun to change as more constructive dialogues are emerging and the lower oil price is making its impact on oil producers. But, the upside is still limited, unless we do actually hear the news of the production cut by both OPEC and non OPEC players.
European markets are struggling today to maintain to build on their gains and carry the momentum where they left off last week. The U.K’s manufacturing PMI data will hit the tape at 10:30GMT and the pessimistic theme has painted the forecast lower in comparison to the previous number. The forecast is for 51.8. If the actual number does fall short of forecast, you may see more weakness for the British pound against the dollar and other major currencies.
There is no denying that last week we have experienced a remarkable number with respect to the Chicago PMI number and if the upcoming ISM manufacturing PMI number also paints a similar outcome, it will restore more confidence for the US economy. The forecast for the ISM manufacturing PMI is for 52.7 which is the same as the last reading.
DISCLOSURE & DISCLAIMER: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam