Flemming J. Nielsen
Danske Bank A/S
Market movers today
In Europe we expect further improvement in manufacturing PMIs in Italy and Spain suggesting stronger growth in the periphery. In the UK the manufacturing PMIs are expected to have stayed very strong in December.
In the US we expect the ISM to decline slightly from its current high level and close some of the gap to the recent industrial production data, where strength has been less pronounced. Initial unemployment claims should also get some attention today.
Selected market news
The US markets ended 2013 on a positive note with S&P500 closing up 0.4% in a new record high on Tuesday on the back on increasing confidence in continued recovery in the US in 2014. US bond yields also continued to edge higher with 10- year Treasury yields finishing the year at 3.03%. Slightly negative risk sentiment this morning on the back of a slight decline in the Chinese manufacturing PMIs but nothing dramatic with Shanghai composite down 0.5%. With Japan closed for holiday the FX markets have been largely range-trading overnight.
In the US data released during the holiday season have in general been stronger than expected albeit data published Tuesday were mixed. Conference Board’s consumer confidence in December increased more than expected to 78.1 from 72.0 in December and the S&P/Case Shiller survey showed house prices gaining a solid 13.6% in December. However, the Chicago PMI in line with other recent regional manufacturing surveys was weaker than expected.
China’s manufacturing PMIs for December suggest that growth lost some momentum in late 2013. The official manufacturing PMI for December released by the National Bureau of Statistics yesterday declined slightly to 51.0 (consensus: 51.2, DBM: 51.2) from 51.4 in November and the Markit /HSBC manufacturing PMI in its final reading for December also showed a slight decline to 50.5 (unchanged from preliminary flash estimate) from 50.8 in November.
In the rest of Asia the manufacturing PMIs released overnight mostly improved in December. South Korea improved to 50.8 from 50.4, Taiwan improved to 55.2 from 53.4, Indonesia improved to 50.9 from 50.3, Vietnam improved to 51.8 from 50.3 and Japan (published on 27 December) improved marginally to 55.2 from 55.1. However, India’s manufacturing PMI declined to 50.7 from 51.3. With all manufacturing PMIs still above 50 the conclusion remains that the macroeconomic impact from the emerging market stress so far has been modest in Asia.
Scandi market today
In Sweden manufacturing PMI for December will be released today. The manufacturing PMI has been exceptionally strong in recent months despite soft hard economic data, see Research Sweden: What to make of PMI? Hence we expect the PMI to have dropped a bit in December but to remain solidly above 50.
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