Weak PMI Data From China Hurts Markets

Asian markets lost ground today after the HSBC/Markit data on China’s PMI was released. The numbers were not good and indicate, even further, that China’s economy is slowing down.

The HSBC flash estimate showed China’s PMI slowing even further. The number came out at 47.7, way below the 50 level which divides expansion and contraction. Part of this weakness is thanks to a rise in money market rates last month. This rise reduced credit available to manufacturers. However, this report is no bad enough to spur any more thought as to whether or not the Chinese government will inject monetary stimulus to rebalance the economy.

STOCKS
The Shanghai composite lost 1.5 percent after the news on China’s PMI/ The Nikkei fell below 14,700 and the Australian benchmark fell back from its two month high. The Kospi is trading around 1,900.

European markets suffered a late session selloff as investors prepared for poor earnings from technology giant and iPhone maker, Apple (NASDQ: AAPL). However the Spanish Ibex jumped 1.4 percent after the Bank of Spain released a report the economy shrank only 0.1 percent last quarter. This is the smallest decline since 2011 and the beginning of the recession.

In the U.S., the DJIA rose 22.19 to a new record high at 15,567.74. The NASDAQ lost 21.11 points and the S&P 500 was off a little over 3 points. Apple, once again, is expected to post horrendous earnings results. Analysts are expecting an EPS of $7.31 a share and revenue from $33.5 to $35.5 billion. Which would be about the same earnings the company reported in Q3 of 2012.

CURRENCIES
The USD/JPY is trading quietly and sideways from 99.20 to 100.00. The EUR/JPY (131.59) remains bullish with support at the key 130.00 level holding, please see the below chart.
EUR/JPY Chart" width="645" height="329">The EUR/USD (1.3209) has been rather tepid lately. However we remain bullish still and could test 1.33 at some point. The GBP/USD (1.5363) is consolidating sideways but has strong support at 1.5300.

COMMODITIES
Copper (3.1735) did reach a high of 3.21 yesterday but has since retreated. For the near term, the outlook remains bullish. A move above 3.22, with a daily close can then see a test towards 3.30.

WTI Crude (108.21) hit a low of 107.56 yesterday but is now trading near the support of 108.20. If that holds we could test 110.00. Gold (1339.30) remains strong and could test 1375.00 this week.

TODAY’S OUTLOOOK
Europe will focus on the weak PMI number out of China today but we could get some relief from Spain as their economy might just be on the mend. However, unemployment is still a major concern.

The U.S. will release some data today as well. They will release their PMI, new home sales, oil inventories and the MBA mortgage applications.