📰 Macro-News round-up
#MarketNews
👉 Yesterday, China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) increased to 51.1 in March from 50.9 the previous month. This was the quickest expansion in 13 months, and company optimism reached an 11-month high. According to unrelated data, South Korea’s exports increased 3.1% in March compared to the same month last year, the sixth consecutive month of growth because of the strong demand for chips.
🌍 According to unrelated data, South Korea’s exports increased 3.1% in March compared to the same month last year, the sixth consecutive month of growth because of the strong demand for chips. In Japan, As per the central bank’s tankan survey, the level of optimism among enterprises in the services sector reached a high point over thirty years ago during the first quarter. However, most of Asia, including export giants South Korea and Japan as well as Taiwan, Malaysia, and Vietnam, had low levels of manufacturing activity.
🇨🇳 China: Citi increased its economic growth prediction for China to 5.0% this year from 4.6% on Thursday, citing “recent positive data and policy delivery”. The IMF raised its growth prediction by 0.4 percentage points to 4.6% in January, citing more government spending. However, this increase is still less than the 5.2% growth that was actually seen last year.
📉 However, there are discrepancies over official growth figures for the Chinese economy. The main threats to growth come from a weak property sector, limited domestic demand, a shrinking trade surplus and high local government debt. Not to mention the problem of growing trade tensions between China and the US-European bloc.
💪 The Chinese government has activated several stimulus programmes, both through public spending and monetary easing. They have reduced the weight of the real estate sector in the economy, and have succeeded in slowing the decline in both investment and sales in the real estate sector.
🇺🇸 US: Due to a significant recovery in production and a rise in new orders, U.S. manufacturing expanded in March for the first time in one and a half years.
However, employment in factories remains subdued, with some increase in lay-offs. On the other hand, input prices rose, which may lead to future inflation in the coming periods.
🏭 The manufacturing sector, which makes up 10.4% of the GDP, had been declining for 16 months in a row until the upturn. Despite the change in consumer spending towards services, there is still a demand for goods. Against the Fed’s forecasts, performance is still exceeding predictions of a decline in activity.
🇪🇺 Europe: Manufacturing data in Europe are bad again. With the exception of Spain and Italy, France and Germany show data of clear economic contraction. The worst of all is Germany, with a manufacturing PMI of 41.9. The UK, on the other hand, shows a PMI of 50.3, indicating economic expansion and achieving the largest increase in activity since the last 20 months.
📊 Market: US equities continue to remain elevated. The SP500 is above 5,200 points and the Nasdaq 100 is above 18,200. The dollar is extremely strong with the DXY almost reaching the 105 point level. US bonds are also rallying strongly, with the 2 year bond returning 4.70%. As we have explained in previous reports, the movement of these two assets clearly indicates that the rate cut is not close to happening. European equities, the DAX 40, closed yesterday in negative territory, but is also at very high levels above 18,400 points.
⛽ Commodity markets are also paradoxically high. Given the strong value of the dollar, one would expect oil and gold to be cheaper. However, gold is at record highs and crude oil is at its highest level in recent months.
🌍 Geopolitics: On the geopolitical front, things are not looking any calmer. Israel bombed the Iranian embassy in Syria, killing several Iranian servicemen and marking a major escalation in Israel’s war. Similarly, both the US and Europe have condemned the Israeli airstrike on food aid NGO workers, in which at least five people of different nationalities were reportedly killed.
🇺🇦 Ukraine, for the first time, reportedly used a pilot less aircraft, rather than a drone, to attack a refinery in the Russian region of Alabuga. Images of a light aircraft crashing and generating a loud explosion have spread on social networks as a testimony of this event.
