Poor Chinese manufacturing PMI data adds pressure to equity and commodity markets

Thursday, February 20, 2014

Chinese HSBC Manufacturing PMI index fell to 48.3 in February from 49.5 in January, reaching a 7-month low. The poor Chinese economic data triggered further concerns over the Chinese economic prospects, adding pressure to Asian equity markets. The Hang Seng index retreated sharply by 1.2%, while the Nikkei index fell more than 300 points, down 2.15%.

 

Minutes from January’s FOMC meeting indicated that several Fed officials are looking for further tapering of bond purchases in the short-term. In general, there was a large diversity of opinion within the committee, while some Fed members remained more cautious about an imminent QE tapering following the recent modest US economic data. The US dollar found some support with the USD index trading around the 80.2 level, while the Euro has slightly retreated towards the 1.370 area.

 

European equity markets have retreated sharply in early trade as poor economic data from China, Germany and France weighed heavily on market sentiment. France’s services sector fell the most in nine months in February, German producer prices declined by 0.1% in January, and missing analysts’ expectations for a 0.2% rise. Investors will be watching closely the release of the Eurozone’s Markit Manufacturing and Services PMI data for a better outlook of the current market conditions. In general, we expect further downside momentum in today’s trading session.

 

Commodities: Brent crude slid below $110 per barrel, dragged down by poor Chinese HSBC manufacturing PMI data. Gold slipped as the dollar firmed after minutes from a US Federal Reserve policy meeting indicated support for continued tapering of its stimulus.

 

Ukraine's global grain traders stay at home following the on-going political uncertainty in the country, with a possible risk premium seen in prices. According to a recent report, international grain traders based in Kiev, Ukraine, have stayed at home on Wednesday, with some trade houses opting to close their offices, after at least 26 people died in the worst violence since protesters began occupying central Kiev.

USD INDEX - Daily Chart

DXY Curncy (DOLLAR INDEX SPOT)   2014-02-20 08-59-21

 

Hang Seng Index -Daily Chart

HSI Index (Hong Kong Hang Seng I 2014-02-20 09-01-42

XAU- Gold Daily Chart

XAU Curncy (Gold Spot   $_Oz )  D 2014-02-20 08-45-02

Events for today:

  

0700

DE

Jan

CPI

0830

DE

Feb

Markit Mfg & Services

0858

EZ

Feb

Markit Mfg & Services

0930

UK

Jan

Retail Sales

1330

US

Jan

CPI

1330

US

w/e

Jobless Claims

1500

US

Feb

Philly Fed

1530

US

w/e

EIA Nat Gas

1600

US

w/e

EIA Energy Stocks

 

All times UK Local Time

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