Summary:
- Chinese official manufacturing PMI falls in August, while the Markit index sees a jump at the same time; mixed readings from other Asian economies too
- A new round of US-China duties come into effect from September
- Merkel’s ruling coalition managed to win in Saxony, while SPD triumphed in Brandeburg in local elections held on Sunday; anti-immigration AfD made a surge
Equivocal PMIs
A start to the new week has brought cautious across Asian equity markets as most of them are trading lower a while before the close, albeit Shanghai Composite is an exception rising as much as 1.3%. A similar picture is also seen in the currency market where the New Zealand dollar is losing the most against its US counterpart being down 0.3%, however, demand for haven assets has been rather subdued as of yet with the Japanese yen climbing only 0.1%. In terms of macroeconomic readings we got over the weekend as well as during Asian trading hours on Monday it is worth mentioning Chinese PMIs for August as they were mixed. Although the official gauge for manufacturing saw a decrease to 49.5 from 49.7 (the consensus had called for 49.6), the Markit index did increase to 50.4 from 49.9 even as the consensus had indicated a tiny decline to 49.8. Focusing on the latter we may notice that production edged up, while export orders remained soft and business confidence deteriorated. Let us notice that the official index focuses mainly on large companies and state-owned enterprises, while the Markit index takes into account a more diversified pool of companies consisting of both larger and smaller businesses.
New tariffs
Meanwhile, a new round of tariffs came into effect on September 1 with the United States imposing duties on $110 billion of Chineese goods, while China slapping tariffs on $75 billion of US goods. Notice that this time US levies seem to be particularly harmful to US consumers as they range from footwear and apparel to home textiles and even certain tech products like the Apple Watch. Moreover, Donald Trump promised to impose even more tariffs on December 15 (on goods worth $160 billion) and those duties are to include laptops or cellphones. Thus, it is hard to imagine that the ongoing trade spath is going to solve anytime soon, hence one may assume that things might get much worse before they get better. That does not bode well for global trade as well as the global manufacturing sector, thus today’s uptick in the Markit PMI from China could be short-lived.
The NZDUSD has started another week on the wrong foot. However, the pair is hovering nearby its crucial demand zone, thus further downside could be limited. Source: xStation5
German local elections
Local elections in Saxony and Brandenburg took place on Sunday and based on exit polls one may presume that the Merkel’s ruling coalition managed to stem a surge by Germany’s far-right populists like AfD. The CDU won in Saxony, thought its share of the vote dropped by 7.4 points to 32%, while the AfD came off second best. In Brandenburg, the SPD came first winning 27.2% of the vote and the AfD also was second with 22.9% of the vote. After exit polls had been released, AfD co-leader Gauland said that he was satisfied with the results in both states. Let us notice that since 2014 the euro-skeptic and anti-immigration AfD has seen a noticeable increase in support which poses a risk the ruling coalition as well as stability for the entire block.
In the other news:
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South Korean’s manufacturing PMI rose to 49 from 47.3, while Indonesian index dropped to 49 from 49.6; Australian AiG increased to 53.1 from 51.3
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Australian inventories fell 0.9% QoQ in the second quarter implying a negative contribution to GDP growth
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Japanese capital spending rose 1.9% YoY in Q2, however, ex-software spending dropped 1.7% YoY
