A raft of PMIs, published courtesy of Markit economics, has come in mainly positive in the overnight and early morning European sessions. The UK’s was slightly below expectation, but still above the minimum term trend. Whilst China’s reached an 18 month high.
In other news the UK banking sector has fallen this week and RBS will add to the nervousness in the sector as they prepare to announce significant losses and the creation of a ‘bad bank’ to dump their highly toxic assets. The Royal Bank of Scotland is on course to make a substantial loss in 2013, its chief executive has said this morning. RBS shares are down 3.4%, making them the biggest faller on the FTSE 100, and at 355 pence well below the 500 pence the taxpayer paid for them when the bank received its bailout.
This afternoon sees some high impact news events in the USA. The Institute of Supply Management publishes its latest data, expected in at 55.3 down from 56.2 the previous month. It’s a survey of about 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.
FOMC member Bullard is set to speak about the US economy and monetary policy at the Regional Chamber’s Financial Forum, in St Louis. Audience questions are expected from journalists. Federal Reserve FOMC members vote on where to set the nation’s key interest rates and their public engagements are often used to drop subtle clues regarding future monetary policy. If the comments are hawkish the dollar will gain more support.
Australian PMI improves in October
The latest seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) improved by 1.5 points in October, rising to 53.2 points. This was the second consecutive month that the Australian PMI has moved above 50 points, indicating mild expansion across the manufacturing industry.
UK manufacturing makes solid start to final quarter
The UK manufacturing sector carried its strong third quarter performance into the final quarter of the year. October saw production and new orders both rise at rates above their respective long-run averages, leading to further job creation. The domestic market remained a prime source of new contract wins, while growth of new export business accelerated on the back of improving global market conditions. At 56.0 in October, down from a revised reading of 56.3 in September, the index is just below its two year high posted plats month.
Swiss PMI down at 54.2 in October
The Swiss purchasing managers’ index fell to a seasonally adjusted 54.2 points in October from 55.3 points in the previous month, data showed on Friday. The index is compiled by the Swiss SVME purchasing managers’ association and Credit Suisse. The procure.ch Purchasing Managers’ Index (PMI) gave up its September gains and dropped by 1.1 points in October. At 54.2 points, it nevertheless closed in the growth zone for the seventh month in a row.
HSBC China Manufacturing PMI
Operating conditions improve at the strongest rate in seven months. After adjusting for seasonal factors, including the recent Golden Week holiday, the HSBC Purchasing Managers’ Index™ (PMI) a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy, posted at 50.9 in October, unchanged from the earlier flash reading, and up from 50.2 in September. Though only slight, it was the strongest improvement of operating conditions in China’s manufacturing sector in seven months.
UK bank RBS to create bad bank to house all toxic assets
UK bank RBS is set to outline a plan on to siphon off tens of billions of pounds of its riskiest assets including Irish property and commercial real estate loans. The assets will be put into an internally managed “bad” bank as part of its efforts to clean its balance sheet and pave the way for a return to private ownership. The bank also suspended two traders in its foreign exchange division; the global probe by regulators into the suspected manipulation of the currency market is rapidly gaining pace.
Market snapshot at 10:15 am UK time
The Nikkei index closed down 0.88% in the overnight/early morning session, the Hang Seng up 0.19%, with the CSI 300 up 0.47% on the day. European bourses have opened down; STOXX index down 0.27%, FTSE down 0.05%, CAC down 0.36% and the DAX down 0.14%.
ICE WTI oil is up 0.21% at $96.58 per barrel, NYMEX natural down 0.45% at $3.56 per therm. COMEX gold is down 0.05% at $1322.90. The equity index future for the DJIA is up 0.18%, SPX up 0.10% and NASDAQ up 0.19%.
The 10-year UK gilt yielded 2.62 percent. The price of the 2.25 percent bond due in September 2023 was at 96.805. Ten-year yields have increased one basis point this week.
Forex focus
The pound gained 0.2 percent to 84.57 pence per euro early in London time after appreciating to 84.51 pence, the strongest level since Oct. 21st. It has climbed 1 percent this week, the biggest gain since the period ended Sept. 6th. Sterling fell 0.2 percent to $1.6006, down 1 percent versus the U.S. currency this week.
The pound strengthened for a third day versus the euro, headed for the biggest weekly increase since September, before an industry report economists said will show U.K. manufacturing output expanded for a seventh month.
The euro fell 0.4 percent to $1.3531 early London time, having declined 2 percent this week, the most since the period ended Feb. 8th. The shared currency dropped 0.5 percent to 132.88 yen after sliding to 132.61, the lowest since Oct. 11th. The yen strengthened 0.2 percent to 98.20 per dollar. The euro weakened for a fifth day versus the dollar as signs of economic weakness in the single currency bloc created speculation that the European Central Bank will cut interest rates as early as next week.
