There was something for everyone in last night’s much anticipated Chinese PMI data, with the official number sliding to the lowest in over 3 years, suggesting the PBOC will need to do more stimulus and is thus bullish, while the unofficial Caixin print rising to the highest since June, suggesting whatever the PBOC is doing is working, and is also bullish. Not unexpectedly, global stocks decided to take the bullish way out, and have risen across the globe led by Asia, where stocks rose as much as 1.8%, Europe also green and US equity futures up 10 points as of this writing.
“There seems to be some modest improvement in investor sentiment on the global outlook and that has supported equities and commodities,” Nick Kounis, head of macro research at ABN Amro Bank told Bloomberg. “The China data were on balance positive.” Sure enough global risk has been in a risk-on mood all morning:
The Chinese PMI “confusion” was deftly handled by Bloomberg which in two separate pieces wrote, on one hand, that “an official manufacturing gauge sank to the lowest in more than three years” while on the other”a private gauge of Chinese factory output unexpectedly rose.” Just as watched was how China’s Yuan would react in its first day of inclusion in the IMF’s SDR basket, and instead of jumping as some strategists had expected, the freely traded offshore yuan fell 0.3% while the onshore spot rate was little changed. Others such as HSBC, said this is precisely the priced in outcome.
Also of note, there were no surprises when it came to policy decisions from the central banks of Australia and India. Both kept their benchmark lending rates unchanged. Elsewhere around the globe, U.K. banks rallied after all seven major lenders passed the Bank of England’s stress tests.
The strong December start was perhaps factored in by the algos, which are well aware that global equities have risen in the last month of the year on all but five occasions since 1988. Helping push European stocks higher was PMI data out of the EU which saw the final German PMI also rise above the flash estimate, printing at 52.9, above the 52.6 expected, while German unemployment dropping to a record low.
A closer look at regional markets starts in Asia, where MSCI Emerging Markets Index rebounded from a two-week low, climbing 1.3 percent, as benchmark gauges rallied across Asia. Hong Kong’s Hang Seng China Enterprises Index advanced for the first time in seven days and the Shanghai Composite Index increased for a second day, adding 0.3 percent.
The ASX 200 (+1.9%) outperformed following a rebound in all sectors and commodity prices, while Nikkei 225 (+1.3%) was lifted by the stellar Japanese capex and continued gains in company profits albeit at a slower pace. Mainland China lagged (Shanghai Comp +0.3%) as participants digested the latest PMI releases in which official manufacturing PMI printed its lowest since August 2012 and Caixin manufacturing PMI was at a 9th month in contractionary territory despite beating expectations. 10yr JGBs traded higher following the well-received 10yr JGB auction which saw the highest b/c since September 2014.
Asian top news:
In Europe, equities initially drifted lower heading into the North American crossover after a relatively choppy start, while the notable outperformer today has been the FTSE-100 (+0.4%), which has been led higher by financials after the BoE announced that all UK banks passed their stress test. On the other hand Linde (-11.9%) are the notable laggard in Europe after lower their 2017 forecast and expecting 2015 earnings to be at the lower end of expectations. However, the initial weakness in Europe to an extent also driven by concerns about the ECB doing less than expected on Thursday, has since been absorbed and the Stoxx had returned back into the green at last check.
European top news:
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