Overnight we learned that the RBA, the central bank of Australia, (as expected) kept the base rate unchanged at 2.5%. In the statement accompanying the base rate decision the RBA cited improved economic conditions and performance globally, particularly in China, as reasons why the RBA decided to leave the base rate unchanged.
There has been a raft of PMIs published overnight and early morning from Markit economics one of the most eagerly anticipated being that of Europe which dipped to a three month low. Italy’s came in at 54.2. In other European news Germany’s unemployment numbers fell to a three month low as the numbers out of work decreased by 12K in March.
The UK manufacturing PMI came in as a surprise, falling to an eight month low. As we’ve come to expect from Markit they tended to sell the positive aspects of the print when in fact the poor reading could be offering more fuel to the theory that the UK economy reached a high water mark in 2013.
Chinese factory activity remained steady in March, suggesting that the economy has stabilised and easing pressure on the government to prop up growth. The official purchasing managers’ index for manufacturing, a survey that is seen as a leading indicator for industrial growth, edged up to 50.3 from 50.2 in February.
The yen remained lower against the dollar after Bank of Japan data showed the Tankan index for sentiment among large manufacturers in the nation rose to 17 in the first quarter from 16 in the previous period.
UK manufacturing upturn remains solid
UK manufacturing production and new orders both continued to rise at robust clips during March, maintaining the positive start the sector has made to 2014. The on-going upturn also supported further job creation. Price pressures continued to ease, however, as input costs fell and selling price inflation slowed to a seven-month low. The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) eased to an eight-month low of 55.3 in March, signalling a further cooling of growth from the peaks scaled towards the end of last year. The PMI nonetheless remains well above its long run average of 51.4 and has highlighted … (full story)
Eurozone manufacturing recovery continues
The recovery in the Eurozone manufacturing sector extended into its ninth consecutive month in March, rounding off a positive start to 2014. Although the final seasonally adjusted Markit Eurozone Manufacturing PMI® dipped to a three-month low of 53.0, from 53.2 in February, the average reading over the first quarter as a whole (53.4) was the best outcome since the second quarter of 2011. March saw an evening out in the balance of the current upturn, as slowdowns in February’s top performers – Germany, the Netherlands and Austria – were largely offset by faster growth in Ireland (35-month high), Spain (47-month high) and Italy.
Strong rise in export orders for Italy helps maintain growth momentum into March
March PMI data showed another solid increase in the level of manufacturing output in Italy, reflecting in part strong growth of new export orders. Employment levels stagnated, however, while stocks were reduced as part of on-going optimisation initiatives. The survey meanwhile highlighted downward price pressures, with both input costs and charges falling since the previous month. The Markit/ADACI Italy Manufacturing Purchasing Managers’ Index ® ( PMI ® ) – a seasonally adjusted composite indicator designed to provide a single – figure snapshot of operating conditions in the manufacturing economy – read 52.4.
German Jobless Falls for Fourth Month as Growth Picks Up
German unemployment fell for a fourth month in March as companies became more confident in the health of Europe’s largest economy. The number of people out of work decreased by a seasonally-adjusted 12,000 to 2.9 million, after falling a revised 15,000 the previous month, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, according to the median of 31 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent after being revised down the prior month to the lowest level in at least two decades.
HSBC China Manufacturing PMI
March data signals sharpest fall of output since November 2011. Business conditions in China’s manufacturing sector deteriorated for the third consecutive month in March. The latest deterioration was the strongest since July 2013, and reflected quicker reductions of both output and total new orders, despite new business from abroad expanding for the first time in four months. Firms cut their workforce numbers and purchasing activity, while both input and output prices fell to the greatest extent since August 2012. After adjusting for seasonal factors, following the recent Chinese New Year festival, the HSBC Purchasing Managers’ … (full story)
RBA Statement on Monetary Policy
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent. Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. China’s growth remains generally in line with policymakers’ objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.
Market snapshot at 10:00 am UK time
The ASX 200 closed down 0.20%, the Hang Seng up 1.02%, the CSI 300 up 0.78% with the Nikkei down 0.24%. In Europe the main bourses have opened up in positive territory with euro STOXX up 0.30%, CAC up 0.32%, DAX up 0.32% and the UK FTSE up 0.26%. Looking towards the New York open the DJIA equity index future is up 0.08%, the SPX future is up 0.05% and the NASDAQ future down 0.04%.
NYMEX WTI oil is down 0.41% at $101.16 per barrel with NYMEX nat gas down 0.25% at $4.36 per therm. COMEX gold is down 0.66% at $1285.80 per ounce, with silver up 0.02% per ounce at $19.76 per ounce.
Forex focus
The dollar fetched $1.3776 per euro early in London after falling 0.2 percent in the previous two days to $1.3769 in New York. It was little changed at 103.26 yen after rising 0.4 percent yesterday. The euro added 0.1 percent to 142.24 yen after advancing 0.5 percent to 142.13 in New York.
Australia’s dollar gained as much as 0.4 percent to 93.04 U.S. cents, the highest since Nov. 21st, before trading little changed at 92.67. The dollar held losses versus most major peers as investors weigh whether U.S. economic data this week will be strong enough to alleviate central bank concerns that the economy still needs stimulus.
Bonds briefing
Treasury 10-year yields rose two basis points, or 0.02 percentage point, to 2.74 percent early in London. The average over the past decade is 3.46 percent. The price of the 2.75 percent securities due in February 2024 fell 6/32, or $1.88 per $1,000 face amount, to 100 3/32.
Japan’s 10-year yield fell 2.5 basis points to 0.615 percent, versus March’s high of 0.645 percent. Australia’s rose to as much as 4.145 percent, the most in a week. Reserve Bank of Australia policy makers met and left the benchmark interest rates at a record low of 2.5 percent.
Investors pulled $10.3 billion out of exchange-traded funds that buy U.S. government debt in March, the biggest exodus since December 2010, data compiled by Bloomberg shows.
