China Disappoints And The Eurozone's Contraction In Q1 May Be The Nadir

 

The record high S&P 500 close failed to carry into the Asia Pacific region today.  A disappointing Chinese PMI and news that Beijing imposed wide-ranging restrictions on the financial divisions of 13 companies weighed on activity. China's Tencent and Meituan were among the biggest losers, and Hong Kong's Hang Seng led the region lower with a nearly 2% drop. 

Still, the Nikkei fell for the fourth consecutive week, and Korea's Kospi snapped a four-week advance. Europe's Dow Jones Stoxx 600, less tech sensitive, is edging up to pare yesterday's loss. It was nearly flat for the week coming into today and is about 2.3% higher on the month. US shares are heavier today, and the S&P 500 is up about 0.75% this week, and the Nasdaq is around 0.5% higher coming into today. Both are up about 6% on the month. The US 10-year yield is firm near 1.65%, while European yields are slightly softer. On the week, yields have risen nearly eight basis points in the US and mostly 5-7 bp in Europe, though the Italian yield has risen a little more than 10 bp. For April, the US 10-year is off about six basis points while Germany's is up eight, France's up 19 bp, and Italy's 10-year yield has risen 22 bp.

The dollar is trading higher today against most major currencies, with the Canadian and Australian dollars and yen holding their own. The Canadian dollar is the strongest major on the week, with a 1.6% gain. Only the yen and Swedish krona are lower on the week, but the euro is flat, having settled last week a whisker below $1.21. Here in April, the dollar has fallen against all the majors. Still, some banks anticipate that month-end position and hedge adjustments will be a headwind for the dollar today. 

Emerging market currencies are trading with a downside bias today. The JP Morgan Emerging Market Currency Index is off for the second consecutive session to pare with week's gains to about 0.5%. It has appreciated by around 1.8% this month, its first monthly advance of the year.  Gold is quiet, consolidating in a narrow range around $1770. It closed last week near $1777.  April is also the first month of the year that the price of gold has risen (~3.6%).  Oil has slipped lower after yesterday's gain, which lifted the June WTI contract above $65 for the first time since early March. It is up about 3.5% on the week and closer to 8.8% for the month. The CRB commodity index has also risen around 8.5% this month and is at its best level since 2018.  

Asia Pacific

China's official PMI disappointed. A pullback was anticipated, but it was larger than expected, though still showing solid growth. The manufacturing PMI fell to 51.1 from 51.9, and the non-manufacturing PMI eased to 54.9 from 56.3. This pushed the composite to 53.8 from 55.3. The fact that the non-manufacturing PMI is above the manufacturing one seems to be a constructive sign for the economy, and in the US, it is also like that, but not in Europe, for example. Separately, the Caixin manufacturing PMI beat expectations, rising to 51.9 from 50.6. Note that China's May Day holiday runs through the middle of next week.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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