Chinese HSBC Manufacturing PMI Disappoints

By FX Empire Analyst - Barry Norman
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This morning markets are reacting to lackluster eco data from China. Traders were hoping to see a turnaround in manufacturing in China, with all the stimulus and programs launched by the Chinese government to help get growth back to forecast. HSBC PMI printed this today at 47.80 showing a continued contraction in manufacturing. PMI needs to report above 50 to show expansion. This is now the 11th consecutive monthly report showing contraction.

Markets are expected to react throughout the day on this data; otherwise the day is very light on news and data.

U.S. stocks rose yesterday as investors dipped back into the market after the recent pullback from a rally that lifted the S&P 500 to just shy of five-year highs.

U.S. home resales jumped 7.8 percent in August, the fastest in more than two years. Housing starts also rose, a hopeful sign that a budding housing market recovery is gaining traction.

New-home construction in the US probably rose in August to the highest level in almost four years; showing residential real estate is sustaining a recovery even as the broader economy sputters. Builders broke ground on 767,000 houses at an annual rate, up from 746,000 in July and the most since October 2008.

The reports came as investors looked for improving economic data to help bolster a rally of 5.9 percent in the S&P 500 since the start of August.

Richmond Federal Reserve President Jeffrey Lacker said the shock from the credit crisis may impede efforts by the central bank to quickly bring down unemployment even with the use of record stimulus. Monetary policy is simply unable to offset all of the ways in which various frictions impede the economy’s adjustment to various shocks.

European stocks climbed, halting a two-day decline, after the Bank of Japan joined the Federal Reserve in opting for further asset purchases to support the economy.

German Chancellor Angela Merkel and French President Francois Hollande, already trying to save Europe’s single currency, are being thrust into another joint project: building a cross-border aerospace company.

Japanese stocks rose on Wednesday, sending the Nikkei 225 Stock Average to the highest close since May 2, after the Bank of Japan unexpectedly expanded its easing program to keep the rising yen from undermining a recovery, following stimulus measures from the US Federal Reserve last week.

Australia’s AAA credit grade was affirmed by Standard & Poor’s Ratings Services, which cited the country’s stability, policy flexibility and economic resilience. The nation has the ability to absorb large economic and financial shocks, although its strengths are moderated by a dependence on resources exports.

Gold fell by 0.23% after US Federal Reserve’s last meeting showed  up the Fed. Reserve is reluctant to brief up the economy with a USD40 bn/month bond buying programme. Gold’s rise after the stimuli is the longest such streak since June. Silver also fell by 0.28% but remained on high parameters.

Oil declined by  0.30%  near the lowest close in more than six weeks in New York after stockpiles rose the most since March in the U.S., the world’s biggest crude user.

Copper fell by 0.09% and traded near the lowest on hopes that Chinese Government will initiate some relief stimulus to provide some force to the Chinese economy in the near-term, but impact seems little

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