- China flash HSBC PMI rose in January, confirming a pickup in economic activity.
- The US House passed a bill that suspends the debt ceiling until summer.
- Focus is on global flash PMIs and earnings results today. Markets Overnight
The US House of Representatives yesterday passed a Republican bill that gives a shortterm extension of federal borrowing authority and the Senate is expected to follow suit in coming days. This effectively pushes the date when the debt ceiling becomes binding to mid July and eliminates one major risk factor (potential debt default) for now but other political risks remain (see Research US: An update on fiscal policy negotiations, 23 January).
In China, the flash HSBC PMI beats expectations this morning, rising to 51.9 from a final December reading of 51.5. This confirms the trend in other data showing a pickup in economic activity in China. This is the fifth month in a row with the PMI in expansionary territory (see Flash Comment China: HSBC PMI improves for the fifth month in a row, 24 January).
Despite the increase in the Chinese PMI, Asian stock markets are mixed this morning. The mainland China Shanghai index is up more than 1% but disappointing earnings results from Apple are weighing on electronic suppliers. Also weighing on sentiment this morning is news that North Korea will conduct a nuclear test ‘targeted’ at the US after the Obama administration pushed additional sanctions through the United Nations. It was a quiet day in the US bond market yesterday where treasury yields were broadly unchanged.
In FX markets, JPY reversed a three-day gain as the Japanese deputy economic minister Yasutoshi Nishimura said this morning that JPY/USD at 100 (currently at 89) would not be a problem but a level of 110/120 would raise import costs. EUR/USD has been broadly stable overnight and so have the Scandinavian currencies.
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