China's flash PMI falters to 50.3 from 51.7 previously

Thursday, August 21, 2014

China’s manufacturing PMI recorded a surprise fall in August as preliminary figures saw the index drop to 50.3 from 51.7 the previous month, well below the consensus expectation of 51.5 according to a Bloomberg poll. The slump in manufacturing activity only adds to the worries of investors after data released last week indicated a slowdown in credit availability with new yuan loans plunging to their lowest level since 2009, falling to 385.2bn yuan in July from 1079.3bn yuan the month before. Compounding this issue further has been a slowdown in the property market as the release of NBS data showed existing residential apartment prices fell m/m in 65 out of 70 major cities throughout July.

Aluminium prices rallied higher yesterday, in anticipation of a stronger PMI reading, breaching resistance around $2,050/tonne which had kept a cap on prices over the past four weeks. The price rallied to a sixteen month high above $2,083/tonne, reaching levels last seen in March last year as investors, encouraged by the risk on attitude on Wall Street as well as hawkish comments from the Fed, positioned themselves ahead of the release. Prices early on this morning have pulled back from the recent highs opening around yesterday’s close and trading just below $2,070 at the time of writing.

Details emerging from the release of July’s FOMC meeting minutes yesterday indicated that policymakers were leaning towards raising the base rate in the near term. Citing improving labour market conditions and stronger economic data more members of the committee were voicing the opinion that borrowing costs may have to rise sooner than they had anticipated. As the Fed nears the labour market targets it set itself macro data will become increasingly important and with a busy day of data investors will have plenty to keep them busy. The sanguine FOMC statement supported both the S&P 500 and DJIA higher, with the S&P 500 once again targeting the record highs seen in July after a sharp sell-off at the start of August.

China's flash manufacturing PMI falls in August

MPMICNMA Index HSBC China Manuf 2014 08 21 07 49 55

3-M LME aluminium prices slip on China data

LMAHDS03 Comdty LME ALUMINUM 3 2014 08 21 08 07 44

Events for today

0830

DE

Aug

Markit Mfg & Services PMI Flash

0900

EZ

Aug

Markit Mfg & Services PMI Flash

0930

UK

Jul

PSNCR & PSNB

0930

UK

Jul

Retail Sales

1330

US

w/e

Jobless Claims

1500

US

Jul

Existing Homes Sales

1500

US

Jul

Leading Index

1500

US

Aug

Philly Fed Business Index

1530

US

w/e

EIA Nat Gas

Topics: US Fed, Aluminium, PMI, LME
More from: Kash Kamal