The Global Recovery Just A PMI In The Sky?

I can’t recall an FOMC rate decision being consigned to the dustbin of market memory as fast as Wednesday 25 bps has been. Swamped under a deluge of worrying trade talk and soft data from the China and the US yesterday, that situation is unlikely to change in Asia either judging by the raft of PMI data just released.

Early Asia data indicated that South Korean exports and imports both continued to fall precipitously as the global slowdown and trade war grinds on. But it was the Markit Manufacturing PMI’s for the region that probably tells the real story. The just-released PMI’s for Indonesia, Malaysia, Taiwan, Thailand, Vietnam and the Jibun Bank Manufacturing PMI for Japan have all disappointed, coming in lower than forecast and mostly anchored in contractionary territory below 50. The sole bright spot was the Markit PMI for South Korea, which rose 0.4 to 48.4, but the headline number hardly causes for joy.

After a disappointing official Manufacturing PMI yesterday, China’s Caixin Manufacturing PMI is released at 0945 SGT this morning with a consensus forecast to fall to 51.0 from 51.4. The data will take on more importance today after the disappointing regional prints and soft data from the US overnight. A below-market print will turn the screws on regional markets that are off to a wobbly start after Wall Street retreated from record highs overnight.

That retreat was mostly sparked by Chinese officials commenting on the likelihood of a final trade deal getting over the table on China’s red-line issues and an unpredictable US President. It would appear that China has taken a page from Art of War and the Art of a Deal to play President Trump at his own game. Reaching a preliminary agreement, and then threatening to walk away from the whole thing unless the other side makes some last-minute concessions. One gets the impression that China would prefer to use docu-sign to sign of the preliminary deal, rather than have to meet Mr Trump somewhere not owned by him for a physical signing ceremony.

If nothing else we can yet again see that a resolution to the US-China trade dispute remains the critical component to keeping the lights on in the global economy. China may be betting that with public impeachment hearings looming in Washington DC and an election year nearly upon us, the President may be more amenable to the art of a deal. With high risks, come high rewards in theory; but it’s just a theory.

Tonights Non-Farm Payrolls is expected to fall to around 86,000, possibly distorted by the General Motors strike. If anything the ISM MAnufacturing PMI data is arguably more critical, especially as it is expected to rise to 48.6. Non-Farm Payrolls are often subject to sizeable back month adjustments and tend to contain much short-term noise for markets, but very little substance after the initial dust settles. However, a series of underperforming releases, given the pullbacks overnight and this morning, could set a painful weeks end scene for equities and energy. Investors might wish to book their haven tickets early ahead of a weekend rush.


Belligerent trade comments from China and some weak US data quickly consigned equity markets to the door overnight, with Wednesday’s FOMC rate cut left by the roadside. Adding a voice of reason here though, Wall Street was trading at near-record highs anyway, and was ripe for a pullback on any negative news. That seems to to have been delivered in spades over the last 12 hours, and Asia is off to a rocky start itself today after some ugly regional manufacturing PMI’s.

Early indications show the Nikkei down 0.60%, the ASX 200 flat and the Straits Times and Bursa Malaysia both lower by 0.20%. The Caixin PMI will be critical for the session as other regional markets come online. A weak number will likely spur more selling in Asia as investors reduce risk into the weekend.

The Hang Seng may be in for a particularly tough day after GDP data collapsed yesterday evening and we saw more violent Halloween protests in the SAR.


The dollar eased overnight as Treasury yields fell on trade comments and weak US data. The dollar index fell 0.32% to 97.32 with havens such as JPY and CVF notable gainers. The GBPO continued is ascent, rising to 1.2950 as Brexit fears faded. General Election worries will likely cap moves above 1.3000 ahead of the weekend.

Regional currencies are unlikely to benefit from the dollar’s travails though as the data released today shows they are in much the same boat. Expect instead, the JPY to be the primary beneficiary of dollar weakness today along with CHF and EUR, with pressure remaining of Asian EM after a strong October.


Oil fell overnight on yesterdays weak China PMI, weak US data and negative trade deal comments from China. Brent crude spot fell 1.10% to $59.85 a barrel with WTI spot suffering more, falling 1.40% to $54.10 a barrel.

Both contracts are sitting on support regions of their up-trend channels of the past two weeks. A procession of bad data today, set against the negative trade comments from China overnight, has the potential to snuff out oil’s October rally. WTI has risen slightly by 0.30% in early trading on overnight profit-taking, but we would expect this rally to run its course quickly. It will likely be replaced by sellers lightening risk as the day progresses and into the weekend.


Gold rose 17 dollars, or 1.15%, to $1512.50 an ounce overnight as risk aversion gripped global markets. Gold closed at the top of its daily trading range in a positive technical development, although it is still some way short of strong technical resistance at $1520.00 an ounce.

The negative environment should continue to benefit gold today as investors look to hedge data and political risk this evening and weekend event risk.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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