The Monday Report

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By Greg Peel

It was global manufacturing PMI on Friday, and Australia kicked off with a pleasing increase in the rate of expansion. The PMI rose to 53.2 from 51.7 in September. While unable to overcome the influence of a weak night on Wall Street on Thursday, Bridge Street was also buoyed by the Chinese manufacturing data. The official PMI rose to 51.4 from 51.1 and the HSBC measure rose to 50.9 from 50.2. The pace of growth is hardly breakneck but expansion is better than contraction.

The UK saw a slight easing in its pace of expansion with a fall to 56.0 from 56.3, while in the US, a rise to 56.4 from 56.2 despite October being impacted by the government shutdown was enough to spur on Wall Street to a positive close for the first session of the new trading month. Thursday night’s trade was affected by profit-taking for books close at the end of a month which saw the S&P 500 rise 4.5%.

The Dow closed up 69 points or 0.5% while the S&P gained 0.3% to 1761 and the Nasdaq ticked up two points.

Attention this week centred in Europe, where the data have appeared to ease back again after earlier signs of life. Last week’s eurozone inflation reading of a paltry 0.7% annualised not so much provides scope for the ECB to cut its cash rate or adopt some other stimulus strategy, it almost implores action. With eurozone nations still up to their eyeballs in debt despite ongoing strict austerity measures, the last thing needed is deflation. The ECB will hold a policy meeting on Thursday.

Forex traders again dumped the euro on Friday, sending the US dollar index up a further 0.6% to 80.72. The euro posted a net 2% fall against the greenback last week. While the Aussie dollar is not a constituent of the US dollar index, fresh strength in the greenback is helping to keep a lid on the Aussie through the crosses. Friday’s healthy PMI data, especially out of China, provided impetus for the Aussie but the currency finished lower on Saturday morning by 0.2% to US$0.9436.

Gold eased back on dollar strength, falling US$10.30 to US$1314.60/oz. Aluminium and zinc posted 1% falls but the other base metals posted minimal moves.

Brent oil tanked on Friday, falling US$2.80 to US$105.97/bbl. Brent built up quite a premium last week to reflect the loss of Libyan production, blowing out its gap over West Texas crude once more. The Libyan situation remains unresolved but North Sea oil rigs came back on line on Friday after a period of scheduled maintenance, and suddenly that gap looked rather wide. West Texas fell US$1.78 to US$94.61/bbl as traders come to terms with the sheer amount of inventory building up in the US.

Spot iron ore was on a bit of a tear on Friday, rising US$3.40 to US$135.30/t.

The SPI Overnight closed up 24 points or 0.5%.

Bridge Street will need to put in some effort today, for tomorrow is Melbourne Cup day. While only Victoria officially closes, the rest of the country mostly takes a holiday as well. The ASX is nevertheless open but activity tends to drift after lunch.

Beijing released its official services PMI yesterday, which showed an increase to 56.3 from 55.4.

Horse racing folly aside, this week is a big one for economic data across the globe. In the US, we are still seeing catch-up data alongside scheduled releases and data which were delayed to provide more time for preparation.

Tonight in the US sees factory order numbers for both August and September. The services PMI is due on Tuesday, while Thursday brings chain store sales and the September quarter GDP number which should have been released last week. Economists are looking for 1.9% growth, down from June’s 2.5%, but Wall Street will see the data as a bit old hat given the first two weeks of October brought the shutdown. The December quarter number will be more interesting.

Friday in the US sees personal income and spending and the Michigan Uni fortnightly consumer sentiment gauge, and the one week-delayed October jobs numbers. That one will be difficult to forecast.

Japan is closed today, while on Tuesday HSBC will release its China services PMI. China’s trade balance is due on Friday, while the monthly data dump of retail sales, industrial production and fixed asset investment will occur on Saturday along with the monthly inflation numbers.

The eurozone will release its manufacturing PMI tonight and services PMI on Wednesday, while both the ECB and Bank of England hold policy meetings on Thursday.

Today in Australia sees the TD Securities inflation gauge, ANZ job ads, a September quarter house price index and retail sales. Tomorrow it’s the services PMI and the RBA will meet, with no one expecting any rate change. The trade balance is due on Wednesday and the jobs numbers on Thursday, along with the construction PMI. On Friday the RBA will release its fourth quarter Statement on Monetary Policy.

Westpac ((WBC)) has already released its full-year profit result this morning, while Commonwealth Bank ((CBA)) will provide a quarterly update on Wednesday. The AGMs are now starting to thin out for the big caps, leaving hundreds of small caps to take up the slack. Fairfax Media ((FXJ)) and Wesfarmers ((WES)) on Thursday and CBA on Friday are the highlights.

Rudi will appear on Sky Business today at 11.15am, on Wednesday at 5.30pm and on Thursday at noon and again between 7-8pm for the Switzer Report.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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