Daily Market Reports | Oct 04 2010
By Greg Peel
The pace of manufacturing growth slowed across the globe in September, although expansion was maintained. The global manufacturing PMI fell to 52.5 from 53.7 in August as all reporting regions recorded slower growth, bar China. The irony is, China is the only economy among them being deliberately slowed.
China's PMI rose to 53.8 from 51.7 which is good news for Australia, offsetting the fact Australia's own PMI actually fell into contraction for the first time in 2010, dropping to 47.3 from 51.7. This result will provide more evidence of Australia's “two-speed” economy to be considered by the RBA at tomorrow's rate decision meeting.
Elsewhere, drops to lower levels of expansion were recorded, with the UK falling to 53.4 (53.7), the eurozone to 53.7 (55.1) and the US to 54.4 (56.3).
The US result was actually seen as relatively positive given fears the manufacturing sector would by now have slipped into contraction, but that was before a surprisingly good August read put those fears to bed. Further data on August income and spending also provided comfort. Incomes rose by a better than expected 0.5% and consumer spending by a better than expected 0.4%. Core consumer inflation rose only 0.1% nevertheless, to bring the annual rate to 1.4%. The Fed has set its inflation comfort zone at 1.5-2.0% and is now targeting inflation for its QE2 decision. Thus this result was also reverse-positive.
New York Fed president William Dudley added more fuel to the QE2 fire on Friday in calling current US levels of inflation and unemployment “unacceptable”.
The result was another solid drop in the US dollar index, which fell 0.9% to 78.05. This had predictable results for the Aussie, which rose 0.7 cents to US$0.9725, gold, which rose US$9.10 to US$1318.60/oz, oil, which rose US$1.61 to US$80.68/bbl, and base metals, which were 1-2% stronger.
The Dow thus managed to close up 41 points or 0.4% while the S&P added 0.4% to 1146. The SPI Overnight gained 25 points or 0.6%.
It's a long weekend in NSW today so it should be rather quiet in today's session. We'll nevertheless see the release of the TD Securities monthly inflation gauge. Tomorrow sees the ANZ jobs ads series and the monthly NAB business sentiment survey, along with retail sales, the service sector PMI and the August trade balance, all ahead of the RBA's interest rate decision. With recent economic data surprising to the weak side, a rate rise will be a close-run thing but the morning's data and today's inflation gauge will all provide food for thought.
Unemployment might be a factor to force the RBA's hand but that's out on Thursday, along with the construction PMI.
It's also unemployment week in the US, and again there'll be more fuel for the QE2 argument. The private sector ADP number is out on Wednesday and official non-farm payrolls on Friday.
Monday in the US sees factory orders and pending homes sales, Tuesday the services PMI, Thursday chain store sales and consumer credit and Friday wholesale inventories and sales.
China will release its services PMI on Monday and HSBC will provide its independent calculation on Tuesday but the Chinese markets will be closed until Friday for National Day celebrations. The eurozone and UK will also release services PMIs and all of the Bank of Japan, Bank of England and ECB will make rate decisions this week, although no movements are anticipated. The UK is umming and ahhing over further quantitative easing.
On the local stock front there's a bunch of AGM's this week before things start to really hot up on that front later in October.
Ah yes – it's October. Funnily enough, October is historically a good month for stocks despite the crashes of '29 and '87, the mini-crash of '89 and panic fallout from Lehman Bros in '08 all occurring in October. But September is the worst month and we were up strongly. So let's not get too bogged down in history.
For further global economic release dates and local company events please refer to the FNArena Calendar.
