Comment by phil

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phil
November 2nd, 2015 at 7:03 am

Good morning! 

Strong Eurozone Manufacturing numbers have offset weak Asian ones for now.  

• Korea PMI – 47.8 (below 50 is contracting)
• Indonesia PMI – 47.8
• Indonesia Inflation – 6.25%
• China PMI – 48.3
• Japan PMI – 52.4 (measured in super-weak Yen) 
• India PMI – 50.7
• Norway PMI – 48.3
• Spain PMI – 51.3
• Swiss PMI – 50.7
• Italy PMI – 54.1
• France PMI – 50.6
• German PMI – 52.1
• UK PMI – 55.5
• Eurozone PMI – 52.3

Nothing to get too excited about but much better than still contracting.  Last EU PMI was 52 so, on the whole up 0.3 in Oct is the net change driving this morning's rally. 

Not much of a rally, really but we were down half a point before the data and now up a bit.



Also weighing on the markets is, so far, not enough policy action out of China after a full week meeting on their next 5-year plan:

China’s Official Factory Gauge Shows Contraction Continues. China’s first key indicator this quarter, an official factory gauge, missed analysts’ estimates, signaling that the manufacturing sector has yet to bottom out as global demand falters and deflationary pressures deepen. The official purchasing managers index was unchanged at 49.8 in October, the National Bureau of Statistics said Sunday, compared with the median estimate of 50 in a Bloomberg survey. Numbers below 50 indicate contraction. “The manufacturing sector is still contracting, though stabilizing," and the report indicates economic momentum remains sluggish, said Liu Ligang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong.  



China's ManufacturingMisses; Nonmanufacturing Worst Since 2008 Despite Unprecedented $1 Trillion "Debt Injection"





China's Manufacturing Misses; Nonmanufacturing Worst Since 2008 Despite Unprecedented $1 Trillion "Debt Injection"



China Steps Up Market Reforms Amid Record Capital Outflows. China is signaling that it’s not letting record outflows this year deter capital-market reforms. The central bank said Friday that it will consider a trial program in the Shanghai free trade zone, allowing residents to buy overseas assets directly and opening up yuan-denominated bonds to trading by foreign companies. Other initiatives include permitting Chinese firms to trade derivatives and establishing securities joint-ventures with international companies. The measures were announced in the face of an unprecedented exodus from China following a surprise devaluation in August and a two-month long stock market rout. Investors pulled $194 billion from the country in September, extending this year’s outflow to $669 billion, according to data compiled by Bloomberg.

China’s banks are propping up corporate zombies. Why? http://econ.st/1kgdvtE 



Commodity currencies off to a shaky start on China worry. Commodity currencies slipped on Monday in the wake of disappointing Chinese data and were notable movers in a 'risk off' start to a week packed with crucial economic news. An official survey on Sunday showed activity in China's manufacturing sector unexpectedly contracted in October for a third month, fuelling fears the economy may still be losing momentum despite a raft of stimulus measures. The Australian  dollar slid as far as $0.7105, from around $0.7138 late in New York on Friday, while its New Zealand peer dipped to $0.6732, turning around from Friday's peak near 68 U.S. cents.



 

Hidili Says Not in Position to Pay Bonds as China Defaults Mount. China faces another test in its credit markets this week after a coal firm signaled it may default on its dollar debt. Hidili Industry International Development Ltd. is not in a position to repay $190.6 million of principal and interest due Nov. 4. on its 8.625 percent notes, it said in a statement Friday. The mining company based in the southwest province of Sichuan has defaulted on some of its 6 billion yuan ($947 million) of loans, it said. Hidili has hired UBS Group AG to advise on bond restructuring, according to the filing. "Given the poor macro backdrop, we are seeing more distress with companies in overcapacity industries," said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. "Defaults, especially in the private sector, will only become more common.”



China Stocks Drop for Second Day as Manufacturing Extends Slump. Chinese stocks fell for a second day, led by commodity producers, after an official factory gauge contracted for a third month. The Shanghai Composite Index dropped 0.5 percent to 3,364.91 at 10:01 a.m., as three stocks slid for each one that gained. Tongling Nonferrous Metals Group Co., the nation’s second-largest copper smelter, slumped 3.3 percent, while Yanzhou Coal Mining Co. lost 1.9 percent.

China’s building spree continues, 4000 shopping malls this year!



Chinese peasants whose fields were bulldozed to make golf courses were not compensated http://econ.st/1jWv5U3 

Macau gaming revenue falls for 17th straight month. Gambling revenue in the Chinese territory of Macau fell 28.4 percent in October from the same period a year earlier, marking the 17th consecutive month of decline, as wealthy clients continued to stay away from China's only legal casino hub. VIP gamblers, which account for about half of revenue, have been staying away from Macau, deterred by a campaign by China's central government against conspicuous spending by public officials, which in turn is part of a wider investigation into unauthorised outflows of money from the mainland.

Crude Supertanker Rates Collapse As VLCC 'Traffic' To China Lowest In 13 Months

Make no mistake, China's economy is still wobbly

The unfair system keeping millions of rural Chinese people in poverty http://econ.st/1OczGy3 

China, Japan and South Korea Conduct First Trilateral Meeting in 3 Years http://nyti.ms/1HksdF7 

China is about to make some big decisions that will affect everyone http://bit.ly/1W7zYuj 

German vs Chinese: what are the cultural differences? http://wef.ch/1Oces36 

China Hard Landing Will Slash US, Global Growth: Kyle Bass http://bit.ly/1XHaVLY 





China is still in their Plenary Session this week and what comes out of it will do a lot to move the markets but clearly there's a lot of weakness there and we need to remain cautious because – if they DON'T do something dramatic – then we can expect continuing deterioration that will not be good.  Don't forget that it's hope of stimulus, and not actual economic improvement, that's driving the markets – remove that hope and we can drop very, very fast.