Caixin Manufacturing PMI disappoints
Asian equities are broadly higher today, with even China markets quickly shrugging off the soft Caixin PMI. Being the first day of the month, some mechanical institutional money could be deploying as monthly savers restock fund manager’s coffers. Or it could be that the soft PMI data across much of Asia has investors pricing in ultra-low rates for longer.
The US had an almost unchanged finish overnight despite all the noise surrounding the consumer confidence data. The S&P 500 finished just 0.14% lower while the Nasdaq edged 0.04% down while the Dow Jones was just 0.12% lower at the close. The rally in Asia has lifted futures on all three by around 0.30% today.
Today, Japan’s Nikkei 225 has leapt 1.15% after PM Suga suggested an election could not be held while Japan battled Covid-19. A lowering of election uncertainty played out well with investors and was helped further when the BOJ’s Wakatabe suggested the BOJ could “do more” if the economy worsened; read more easing. The Kospi was quiet comparatively, rising by just 0.15%.
China markets have also rallied strongly after dipping on the low-ball Caixin PMI release. It seems again that hopes of stimulus are lifting stocks, with the Shanghai Composite rising by 0.50% and the narrower Shanghai 50 leaping 1.95%. The CSI 300 has rallied an impressive 1.15%, while the Hang Seng is 0.60% higher.
The story is similar in Singapore, now 1.0% higher today, although Taipei is unchanged. The poor regional PMIs seem to be weighing on ASEAN, though, with Jakarta down 0.75%, Bangkok down 0.35%, Manila down 0.25% and Kuala Lumpur down 0.65%. India could enjoy a decent start to the day after last night’s GDP release showed an impressive rebound even considering YoY baseline effects. Australian markets are slightly lower on the day after softer Q2 GDP, and its continuing Covid-19 battle introduced a dose of reality to domestic markets. The ASX 200 has fallen by 0.35%, while the All Ordinaries has edged 0.15% lower.
Given the first day of the month buying evident among the heavyweights of North Asia, it is not unreasonable to expect European markets to open higher this after along with London. Tonight in the US, volatility will be driven by the ISM Manufacturing data and the ADP Employment. Although poorly correlated lately, the ADP data will be used to adjust expectations for this Friday’s Non-Farm’s release.
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