Market Overview

Global Manufacturing PMIs Bounce In January

Global Manufacturing PMIs Bounce In January
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Manufacturing PMIs around the world bounced higher in January as the outlook for the global economy continued to improve. Manufacturing data from China to England showed improvement in the global manufacturing sector in the month, a positive sign for the global economy.

In China, the official Manufacturing PMI fell unexpectedly to 50.4 from 50.6 in December, missing expectations of a reading of 50.9. However, the methodology of the index was changed this month to include 3,000 companies from the previous 600, so the numbers may not be comparably to previous data and should require revisions to old data to adjust for the larger sample size.

Positively, the HSBC China Manufacturing Index, the survey compiled by Markit and now more comparable to the official number due to the change in methodology, rose to 52.3 in January from 51.9 in December. Economists had been looking for a rise to 52.1 in January, so the data beat estimates, sending Chinese and Australian shares sharply higher.

More good news came from Europe, as the Eurozone Manufacturing PMI rose nicely in January. The Manufacturing PMI for the eurozone rose to 47.9 from 47.5 in December, beating forecasts of a flat reading at 47.5. Although still showing contraction, the index shows that the rate of contraction is slowing and that the European manufacturing sector could be on the rebound.

Manufacturing PMI's were released for the following large European economies:

  • Germany's Manufacturing PMI rose sharply to 49.8 from 48.8 in January on expectations of a flat reading.
  • France's Manufacturing PMI was flat at 42.9 on expectations of a flat reading.
  • Italy's manufacturing sector improved sharply as the PMI rose to 47.8 from 46.7 in December, beating forecasts of a reading of 47.2.
  • Spain's manufacturing PMI improved sharply as well, rising to 46.1 in January from 44.6 in December, beating forecasts of a reading of 45.5.

Markets were on the move following the PMI's, especially those in Europe. Stocks rose in Germany, France, and the U.K., however Spanish and Italian shares declined following the removal of the short-selling ban on Spanish stocks. The euro was also broadly strong with the EUR/USD rising above 1.3650, the EUR/JPY rising above 125, the EUR/GBP rising above 0.86, and the EUR/AUD rising above 1.31.

The news is positive for investors who were concerned that stocks were rising and financial markets were seeing relaxed stresses while the broad economy was not improving. If the services PMI's, to be released next week, also show improvement, it would confirm that the Eurozone and the broad global economy are in fact improving as hoped.

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