Dollar remains firm today as markets are still dominated by risk aversion. IMF announced over night a set of measures to offer short-term credits as insurance for nations. That helped stabilized sentiments a bit. But markets were then sold off again as data from China showed the manufacturing sector might contract in near term. EUR/USD is staying in tight range but remained soft and vulnerable to a break of 1.34 level. Aussie remains the weakest currency this week on risk aversion, and on it's strong tie to China, where the stock markets dropped for the longest losing streak since May.
IMF announce a set of measures to "bolster the flexibility and scope" of the emergency program to help "bystanders" countries that are affected by eurozone debt crisis in a "broader range of circumstances" to "break the chains of contagion". Bystanders are those with "relatively strong policies and fundamentals" but are facing liquidity problems as impact of the Eurozone debt crisis. IMF will replace the "precautionary credit line with a more flexible "precautionary and liquidity line" with durations as short as six months with access up to 500% of a member nation's quota. It could also be used for longer programs under 12- to 24- month arrangements with access up to 1000% of the quota. There's also a new "rapid financing instruction" for countries facing urgent balance of payment needs caused by exogenous shocks, including political upheaval and natural disasters.
The HSBC China manufacturing PMI dropped sharply by 3 points from 51 to 48 in November, hitting a 32 month low. The last time PMI breached 50 was in September, and that was a near miss at 49.9. But this time, the reading of 48 is raising the odds that manufacturing activities in the world's growth engine are going to contract in near term. Looking at the details, the output component also dropped to steeper from 51.4 to a 32 month low of 46.7 while input and output prices also dipped below 50. New export was the only component that stayed above 50. The latest report from the World Bank suggested that China would be heading for a soft landing with annual GDP growth of above 8% in 2012 of growth. The world lender stated that 'clearly the region is being affected by Europe and the global environment has weakened'. Today's data is proving this view.
Looking ahead, PMI data from Eurozone will be released and both indices are expected to showed deeper contraction. BoE minutes is expected to show unanimous vote to keep rates and the asset purchase program unchanged. From US, a number of economic data will be released ahead of tomorrow's thanks giving holiday, including durables, personal income and spending, jobless claims and U of Michigan sentiments.
IMF announce a set of measures to "bolster the flexibility and scope" of the emergency program to help "bystanders" countries that are affected by eurozone debt crisis in a "broader range of circumstances" to "break the chains of contagion". Bystanders are those with "relatively strong policies and fundamentals" but are facing liquidity problems as impact of the Eurozone debt crisis. IMF will replace the "precautionary credit line with a more flexible "precautionary and liquidity line" with durations as short as six months with access up to 500% of a member nation's quota. It could also be used for longer programs under 12- to 24- month arrangements with access up to 1000% of the quota. There's also a new "rapid financing instruction" for countries facing urgent balance of payment needs caused by exogenous shocks, including political upheaval and natural disasters.
The HSBC China manufacturing PMI dropped sharply by 3 points from 51 to 48 in November, hitting a 32 month low. The last time PMI breached 50 was in September, and that was a near miss at 49.9. But this time, the reading of 48 is raising the odds that manufacturing activities in the world's growth engine are going to contract in near term. Looking at the details, the output component also dropped to steeper from 51.4 to a 32 month low of 46.7 while input and output prices also dipped below 50. New export was the only component that stayed above 50. The latest report from the World Bank suggested that China would be heading for a soft landing with annual GDP growth of above 8% in 2012 of growth. The world lender stated that 'clearly the region is being affected by Europe and the global environment has weakened'. Today's data is proving this view.
Looking ahead, PMI data from Eurozone will be released and both indices are expected to showed deeper contraction. BoE minutes is expected to show unanimous vote to keep rates and the asset purchase program unchanged. From US, a number of economic data will be released ahead of tomorrow's thanks giving holiday, including durables, personal income and spending, jobless claims and U of Michigan sentiments.