Weaker Chinese PMI, Fed uncertainty sends markets lower

Monday, December 16, 2013

Market participants will be firmly focused on the US Fed this week as the FOMC will meet to consider the possibility of tapering bond purchases. With market participants expecting the FOMC to keep their rates decision unchanged at 0.25% this week the recent positive announcements in the run up to the meeting have increased speculation that stimulus will be gradually withdrawn. With Congress reaching an agreement regarding the 2014 budget, better than expected retail sales and a steadily improving housing market the stage is set for the Fed to reduce QE.

Asian equity markets drifted lower during overnight trading, starting off the week on the back foot as weaker than expected flash manufacturing PMI and uncertainty surrounding the upcoming Fed meeting eroded support for risk assets. The HSBC/Markit flash manufacturing PMI reading for December came in at 50.5, slightly below the median estimate of 50.9 according to a Bloomberg survey. Japanese equity markets were significantly weaker on the slightly bearish outlook with the Nikkei and TOPIX losing 1.62% and 1.29% respectively. Chinese stocks fell for a fifth straight session on the flash PMI reading with the CSI 300 and Shanghai Composite both ending the session 1.6% lower.

A busy day for economic data will keep investors engaged as they continue to weigh up any potential positive surprises against the likelihood of tapering. Over in the US, industrial and manufacturing output, capacity utilisation and the NY Fed manufacturing index will all provide further market colour in the run up to the FOMC meeting. Flash manufacturing and services PMI in the eurozone will give investors further indication of global economic market conditions. French manufacturing and services PMI have already come in slightly below expectations, at 47.1 and 47.4 respectively.

Eurozone manufacturing PMI highlights the fragile economic conditions 

PMITMEZ Index Eurozone Manufact 2013 12 16 08 07 39

Events for today: Monday, 16 December 2013

0828

DE

Dec

Markit Services and Mfg flash

0858

EZ

Dec

Markit Services and Mfg flash

1330

US

Q3

NF Prod. & Labour Costs

1330

US

Dec

NY Fed Manufacturing

1415

US

Nov

Industrial & Manufacturing Output

1415

US

Nov

Capacity Utilization

LT: 

Dec  Brent Crude (ICE)

Dec  Sugar (LIFFE)

OE: 

Dec  Sugar (NYBOT)

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Topics: Nikkei, US Fed, PMI, TOPIX
More from: Kash Kamal