Markit Economics have published a raft of manufacturing PMIs overnight and early morning. China’s print indicated a stall, whilst Europe’s indicated a gain and therefore a recovery in the overall manufacturing sector. The UK’s PMI fell by close on a point, suggesting that the UK’s recent advance may have reached a high water mark. France’s PMI disappointed by falling below the critical 50 mark at 47, whilst Italy’s rose to a 33 month high at 53.3.
European markers have fallen in early trade with the PMIs not exciting analysts and investors enough. This fall followed a mixed session in Asia and Australia.
WTI oil has risen in the morning session, whilst gold has risen sharply as has silver in early trade.
HSBC China Manufacturing PMI
Chinese manufacturers signalled a further expansion of output in December, though the rate of growth eased from the previous month. New orders also rose at a fractionally slower pace, with foreign sales posting a slight decline for the first time in four months. Staffing levels fell for the second month in a row, while backlogs of work increased at a moderate pace. After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index posted at 50.5 in December, unchanged from the earlier flash reading, and down slightly from 50.8 in November.
UK manufacturing recovery remains on track at end of 2013
The UK manufacturing sector ended 2013 on a positive footing. December saw rates of expansion in production and new orders both remain among the highest in the 22-year survey history, leading to a pace of job creation close to November’s two and a half year record. Companies benefited from strengthening domestic market conditions and a solid bounce in incoming new export orders. The seasonally adjusted Markit/CIPS Purchasing Manager’s Index posted 57.3 in December, down slightly from November’s 33-month high of 58.1.
Italian output growth hits 32-month high in December
The upturn in Italy’s manufacturing sector continued into the final month of the year, with latest data showing further growth of output, new orders and employment. Moreover, rates of expansion were the fastest for more than two-and-a-half years in each case. There were also increases in backlogs of work and purchasing activity during the month, the latter helping to push input price inflation to a 21-month high. The seasonally adjusted Markit/ADACI Italy Manufacturing Purchasing Managers’ Index – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – read 53.3 in December, up from November’s mark of 51.4.
French factories suffering
France saw its factory downturn intensify with the worst monthly manufacturing report since May 2013. The French manufacturing PMI dropped to just 47 for December, a seven-month low, and well below the 50-point level that splits expansion from contraction. That shows a sharper downturn in the manufacturing sector of Europe’s second-largest economy. Market warned that output, new orders, employment and stocks of purchases all decreased at sharper rates in December. New orders declined for the third month in a row, with exports dropping at the fastest rate since June.
Jack Kennedy, Senior Economist at Markit warned there was no sign of a turnaround yet
[quote]Anecdotal evidence suggested that lingering uncertainties continue to hold back the spending and investment that are necessary to support a recovery in the sector. Instead, most key variables in the latest PMI survey showed deteriorating trends to suggest that no such turnaround is in sight.”[/quote]
Markit Eurozone Manufacturing PMI – final data
The recovery in the Eurozone manufacturing sector accelerated further at the end of 2013. The seasonally adjusted Markit Eurozone Manufacturing PMI rose for the third month running to post 52.7 in December, up from 51.6 in November (and unchanged from the earlier flash estimate). The headline PMI has now signalled expansion throughout the second half of the year.
Market snapshot at 10:00 am UK time
The ASX 200 closed up 0.30%, the CSI 300 down 0.35%, the Hang Seng up 0.14% and the Nikkei down 0.69%. Euro STOXX is up down 0.64%, CAC down 0.72%, DAX down 0.62% with the UK FTSE down 0.30%.
At the time of writing 10:00 am UK time The DJIA equity index future is currently up 0.33%, the SPX future is up 0.35% and the NASDAQ future is up 0.50%.
NYMEX with oil is up 0.44% at $98.85 per barrel, NYMEX nat gas is up 0.26% at $4.24 per therm, COMEX gold is up 1.52% at $1220.60 per ounce with silver at $-9.94 up 2.94%. West Texas Intermediate oil rose today after capping an annual gain of more than 7 percent, its fourth annual increase in five years. Data from the Energy Information Administration is forecast to show inventories decreased by 2.83 million barrels to 364.7 million.
Forex focus
Sterling rose 0.2 percent to 82.88 pence per euro early London time. The pound was at $1.6573 after gaining 1.9 percent versus the U.S. currency in 2013. It climbed to $1.6603 earlier, the highest since August 2011. The pound rose versus the euro before a report today that analysts said will show U.K. manufacturing expanded in December, adding to evidence the economic recovery accelerated.
The yen traded at 105.35 per dollar, near the weakest level since 2008, after sliding 18 percent in 2013. The Aussie was at 88.88 U.S. cents, extending declines from Dec. 31st when it completed last year’s 14 percent fall, the currency’s worst performance since 2008.
Bonds
Ten-year yields advanced one basis point, or 0.01 percentage point, to 3.04 percent early in London, the highest level since July 2011. The price of the 2.75 percent security due in November 2023 fell 3/32, or 94 cents per $1,000 face amount to 97 17/32. Ten-year Treasury yields rose on speculation the U.S. economy will improve enough for the Federal Reserve to end its bond purchases in 2014. Similar-maturity Australian sovereign debt yields rose 10 basis points to 4.33 percent.
The 10-year bund yield advanced three basis points, or 0.03 percentage point, to 1.96 percent early London time. It reached 1.97 percent, the highest since Sept. 23rd. The price of the 2 percent bund due in August 2023 fell 0.27, or 2.70 euros per 1,000-euro ($1,374) face amount, to 100.33. German bunds fell, pushing the 10-year yield to a more than three-month high.
