Thursday, July 21, 2011

Chinese Flash Reading on Manufacturing Contracts for First Time in a Year, Falling to 28 Month Low, While Eurozone Slows; Markets Shrug

Sometimes you really wonder how little news matters to markets ... according to a flash survey the driver of global growth the past 3 years, China, will report its lowest PMI reading in manufacturing in 28 months on August 1.... and essentially we have seen a yawn in response.  While I do expect corporate earnings to dominate at this time, along with the continuing drama in the sovereign debt arena, this (non)reaction is surprising.

Europe also reported some poor data this morning... more yawning.

Via Reuters:

  • Growth ground to a halt in the euro zone's private sector this month while China's factory sector contracted for the first time in a year, surveys showed on Thursday, deepening evidence of a sharp slowdown in the global economy.
  • In the latest sign economic growth is dwindling, Markit's Eurozone Purchasing Managers' Indexes showed growth in the 17-nation bloc's factory sector came to a standstill in July while its dominant service sector grew at its slowest rate in 22 months  "The large fall in the flash euro zone PMI in July provides further signs that the debt crisis may be starting to take a heavy toll on the economic recovery in the region," said Ben May at Capital Economics.
  • The flash services PMI sank to 51.4 this month from 53.7 in June, its lowest level since September 2009 and falling far short of expectations for 53.0 but has been above the 50 mark that divides growth from contraction for nearly two years.  The flash manufacturing PMI fell to 50.4 from 52.0 in June, its lowest reading since September 2009 and missing consensus expectations in a Reuters poll for 51.5.
  • Output in the euro zone's manufacturing sector, which drove a large part of the recovery in the bloc, shrank for the first time in two years, with the index falling to 49.5 from 52.5, its lowest since July 2009.  Factories also saw new orders falling for the second month running, with the index sliding to 47.6 from 49.8, its lowest reading since June 2009.
  • An earlier release from Germany, Europe's largest economy, showed its composite PMI staging the biggest one month fall since late 2008, slumping to 52.2 from June's 56.3.
  • "There is no doubt that the free fall in the PMIs of the last three months comes as a negative surprise. We believe that external factors remain predominant, in particular the ongoing softening in the global factory cycle, as shown by further signs of weakness in China this morning," said Marco Valli at UniCredit.

Via NYT:
  • The vast Chinese manufacturing sector appears to have contracted in July for the first time in a year.  The initial results of a closely watched survey of purchasing managers produced reading of 48.9 in July, the lowest level in 28 months — down from 50.1 in June, said HSBC, which published the index.
  • HSBC’s preliminary index, known as the Flash PMI, is based on 85 percent to 90 percent of responses to a survey of executives in more than 400 companies. Output in July contracted at a faster rate, export orders shrank at a slower pace and the gauge of new orders dropped below 50, the dividing line between expansion and contraction, today’s data showed

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