Global Stocks, US Futures Slide On Mediocre Manufacturing Data, Yen Surge

Following the latest set of global economic news, most notably a mediocre set of Chinese Official and Caixin PMIs, coupled with a mix of lackluster European manufacturing reports and an abysmal Japanese PMI, European, Asian stocks and U.S. stock index futures have continued yesterday’s losses. Oil slips for 4th day, heading for the longest run of declines since April, as OPEC ministers gather in Vienna ahead of a meeting on Thursday to discuss production policy. The biggest winner was the Yen, rising 1%, with the USDJPY tumbling overnight and pushing both the Nikkei 1.6% lower and weighing on US futures, when Abe’s official confirmation of a 2.5 year delay in Japan’s sales tax appears to have backfired once again, and led to a rush to safety reaction.

The Stoxx Europe 600 Index declined to a one-week low, with 18 out of 19 Stoxx 600 sectors falling; the MSCI Asia Pacific Index halted a five-day winning streak and copper fell by the most in three weeks. S&P500 futures declined 0.3%. The yen strengthened the most in a month as Japan delayed a planned sales-tax hike, as a result Japan’s Topix index slid 1.3 percent even as Softbank Group Corp. climbed to its highest in more than a month in Tokyo after announcing plans to sell at least $7.9 billion of its stake in Alibaba Group Holding Ltd. India’s rupee dropped after a local-language newspaper reported that central bank Governor Raghuram Rajan doesn’t want an extension of his term. Crude oil slipped toward $48 a barrel before an OPEC meeting on Thursday. The pound weakened for a second day on speculation a vote for Brexit is becoming more likely.

Summarizing the slew of overnight economic and PMI data:

As noted last night, China’s purchasing managers’ indexes for May added to evidence that growth remains subdued after the economy expanded last year at the slowest pace in more than two decades. Similar manufacturing gauges for the euro area and U.K. pointed to mediocre expansion, while a gauge for the U.S. is also due Wednesday. Polls showing an increased risk that the U.K. will vote to leave the European Union in a June referendum are also making investors wary.

In light of the poor global PMI data, concerns about global growth have returned: “In normal global cycles, global trade would be running at around double global GDP, but post the GFC (Great Financial Crisis), global trade has been running only half of the rate of previous cycles. It would seem that trade is caught in a vicious cycle of ever rising inventories, falling industrial production and declining global trade volumes,” Jefferies equity strategists including Sean Darby and Kenneth Chan wrote in a note.

“The recovery in Europe is not accelerating and we have a very, very heavy week for data and events still ahead of us, so you can forgive people for a wait-and-see mood,” said William Hobbs, head of Europe, Middle East and Africa investment strategy at the wealth-management unit of Barclays Plc in London. “Markets are trapped a little bit, people are worried about geopolitics and the British referendum. This is keeping investors on the sidelines in case the worst-case scenario comes through.”

Market Snapshot:

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