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Manufacturing PMI's Missing To The Downside

Published 01/11/2017, 01:33 pm
Updated 06/07/2021, 05:05 pm

Originally published by AxiTrader

The attack in New York this morning after the close of the stock market - an attack which President Trump tweeted had been carried out by a "sick and deranged person" has not impacted markets or sentiment this morning.

That means that the dominant themes in markets today are going to be improving investor risk appetite as equity markets keep rallying, a positive outlook for global growth as data continues to point in that direction, and a mixed outlook for the US dollar which is neither universally strong or weak.

To recap, overnight US stocks were a little higher as earnings and consumer confidence - which hit a 17 year high - gave a positive backdrop to trade. The Nasdaq 100 made another record closing high at 6248, while the S&P 500 and Dow Jones Industrial Average were marginally higher at 2,575 and 23,377 respectively.

US 10-year bonds tried to rally but ended the day at 2.38% - neither hot nor cold in a Goldilocks kind of place right now.

On currency markets the US dollar was stronger against the yen and Swissie, battled to a standstill against the euro, and put the commodity bloc under intense pressure once more. At least until the New Zealand employment data shot the lights out lifting the kiwi from it's lows and up 0.7% to 0.6891 as I write.

That disparate outlook for currency pairs had its mark in AsiaForex as well with the USD/KRW making a fresh 2 month low after last week's push below the uptrend since July. 1,110 seems to beckon for the won.

Chart

That strength in the won remains despite a miss this morning for trade data which showed export growth in the year through October collapsed from 35% in September to just 7.1% in October. That was well below even the lowest guesstimate in the Reuters poll. Likewise, imports fell from a 22.6% pace to just 7.4% year on year in October - another big miss to the downside. As a result the trade balance fell from $13.4 billion to just $7.3 billion.

Separately inflation data in South Korea fell 0.2% in October to take the year on year rate down to 1.8% from the previous month's 2.1%.

This is a very interesting set of numbers and suggests that the raft of PMI releases across Asia needs to be watched closely when they are released this morning as a guide to the outlook for global growth and trade. Indeed just as I'm about to hit publish Malaysian, Korean, Taiwanese, and Thai manufacturing PMI's have all printed below last months level.

Turning to China now and the bond market selloff in the wake of PBOC governor Zhou's warning of a Minsky Moment found its corollary in a bond market sell off which has taken China's benchmark 10-year bond up to 3.91% which is its highest level since 2014.

No wonder the PBOC has been injecting liquidity and trying to calm nerves. 4% has been an important level for Chinese 10-year rates offering solid resistance and then support as rates moved through that level for much of this century.

Chart

Given the leverage in the economy and the need for reform neither the PBOC or president Xi would wish for rates to take a material step through and into a higher range above 4%.

Have a great day's trading.

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