Did The Fed Steal The Jobs Data Thunder?

Overview: Weak manufacturing PMI readings are curbing risk appetites ahead of the US jobs report. Growth concerns are top and center after dovish Fed and the Bundesbank's Weidmann warning that Germany may undershoot 1.5% growth this year, though the ink is barely dry on the central bank's forecast for 1.6% growth this year and next. Equities in Asia were mostly lower, with China, India, and Thailand the notable exceptions. Note that China scrapped automatic margin calls as of today. Shares are doing better in Europe, and the Dow Jones Stoxx 600 is set to extend its streak to the fourth consecutive session to round out the fifth weekly gain. The S&P 500 closed above 2700, seeing its best level since early December. It has approached a key retracement near 2713. Asia-Pacific bonds rallied after yesterday's US advance, but European bonds are not following suit.  Italian bonds are under pressure, with 10-year yields jumping nearly 10 bp. The dollar is narrowly mixed. The Australian dollar and sterling are the heaviest, off about a quarter of a point in late morning turnover in London, while the euro and Swiss franc are edging higher, and the yen virtually flat.  

Asia Pacific

The main takeaway from the regional manufacturing PMI readings is that a combination (and it is hard to separate) of a slowing in the Chinese economy and the trade tensions have rippled across the Asia Pacific region, though the earnings data from many European and American companies also were adversely impacted. Moreover, it is not clear that a trough is in place.

China's Caixin manufacturing PMI fell to 48.3 in January from 49.7. Last January it stood at 51.5.  If a bright spot it to be seen, it is that improved export orders. Japan offered a mixed report. On the one hand, at 50.3 the manufacturing PMI improved from the preliminary reading of 50.  On the other hand, it stood at 52.6 in at the end of 2018. Consider two other large economies, South Korea and Taiwan. South Korea's manufacturing PMI fell to 48.3 from 49.8. It is the third consecutive report below the 50 boom/bust level. Indeed, except for last September and October, the manufacturing PMI has been below 50 since last March. Taiwan's manufacturing PMI fell for the seventh consecutive month (to 47.5 from 47.7) and has been below 50 since October. Irony may be found in the fact that while the regional economy seemed to be performing so miserably, regional equity benchmarks had their best month in a decade. 

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Read more by Marc on his site Marc to Market.

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