Manufacturing Data Boost Risk Appetite as 2012 Starts

Solid manufacturing data from China and Australia gives risk appetite a boost as the year 2012 starts. New Zealand dollar and Australian dollar gain most broadly while Aussie makes another record high against Euro. The official China Manufacturing PMI released over the weekend climbed back to expansion level of 50.3 in December. The dip to contraction region below 50, at 49 in November seemed to be brief so far and the manufacturing industry is steady ahead. Improvement across the components was also broadly based. Details suggested that the slowdown in domestic demand has stabilized with 'new order' gaining 0.9 points to 49.5 and 'new export order' rising to 49.4 from 47.1 in November. Meanwhile, the 'overstock order' gained modestly to 46.0 in December from 45.7 in November. Note that these three readings remained in contraction but the improvements signaled stabilization in domestic demand. Meanwhile, China's non-manufacturing PMI also rose impressively from 49.7 to 56.0 in December.

Meanwhile, According to the report by HSBC and Markit, India's PMI added 3.2 points to 54.2 in December. The improvement indicated that the country's economic outlook should not be as weak as GDP and IP data had suggested. As stated in the HSBC report, the data brought 'some relief with regards to growth' as 'domestic demand is providing solid support for activity on the ground. Moreover, the rise in overseas orders suggests that conditions for export oriented industries are maybe not quite as dire as feared'. Yet, the central bank of India would continue to reverse monetary tightening implemented since March 2010 to stimulate growth.

The Australian manufacturing PMI also expanded for the first time in six months in December, up from November's 47.8 to 50.2. Impressive jump was seen in supplier deliveries, which rose 6.9 pts to 52.8. Production sub-index rose 1.4 pts to 51.0 while new orders rose 1.8 pts and was at 49.9. The only sub-index that recorded a fall was exports which dropped -6pts to 47.4. The data points to resilience of the Australian manufacturers against global headwinds.

More PMI data will be released later today, with Swiss SVME PMI expected to recover to 45.34, UK PMI manufacturing is expected to drop slightly to 47.3. US ISM manufacturing is expected to rise to 53.2 in December. Also featured are German unemployment, US construction spending and FOMC minutes.

Happy new year to our readers. Wish you a successful year in 2012!