Macro Roundup (May 3)

SHANGHAI, May 3 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The US dollar index registered three consecutive days of gains and closed at 92.725, up 0.28% overnight.

Base metals saw mixed trading. LME copper rebounded from a three-week low, and SHFE copper saw a smaller decline as the expansion in China’s manufacturing sector accelerated in Caixin’s purchasing managers’ index (PMI) reading for April. LME aluminium surged 3.3% and nickel rose over 1%. LME lead dropped over 1%. SHFE lead inched up slightly, aluminium rose close to 1% and nickel and tin edged up.

The US Federal Reserve Board held interest rates unchanged on Wednesday and said that inflation has “moved close” to its target and that, “on a 12-month basis is expected to run near the Committee’s symmetric 2% objective over the medium term”.

Caixin’s manufacturing PMI climbed to 51.1 in April from a four-month low of 51 in March and topped the forecast of 50.9. While the reading remained above the 50-point mark that divides growth from contraction, the sub-index on export orders shrank for the first time since November 2016.

“Overall, operating conditions across China’s manufacturing sector continued to improve in April,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note accompanying the survey. “But uncertainty in exports has increased significantly, and the dependence of the Chinese economy on domestic demand is rising.”

Germany’s Markit PMI for manufacturing, which accounts for about one fifth of the economy, fell to 58.1 in April, from 58.2 in March, in line with forecast.

“The manufacturing PMI slipped to a nine-month low in April, but alarm bells aren’t ringing yet. The sector boomed in the second half of 2017 and probably overheated,” according to Phil Smith, principal economist at IHS Markit.

He added that while the increase in output was robust, new orders booked their smallest gain in 17 months. “A further slowdown in order books in May would mean some downside risks to the outlook,” Smith said.

The eurozone’s Markit final manufacturing PMI fell to a 13-month low of 56.2 in April from March’s 56.6.

The seasonally adjusted gross domestic product (GDP) of the eurozone in the first quarter rose 0.4% quarter on quarter, and 2.5% year on year, both matching market expectations.

The US private sector employment grew by 204,000 in April, higher than the expected 198,000, according to the ADP employment report.

“The labour market continues to maintain a steady pace of strong job growth, with little sign of a slowdown,” Ahu Yildirmaz, ADP vice-president and co-head of the ADP Research Institute, said in a statement. “However, as the labour pool tightens, it will become increasingly difficult for employees to find skilled talent.”

Inventories of US crude oil during the week ended April 27 jumped by 6.22 million barrels, according to data from the Energy Information Administration (EIA). Gasoline inventories also unexpectedly increased 1.17 million barrels but refined oil inventories shrank by 3.9 million barrels.

Day ahead

Key factors to watch today include the eurozone’s consumer price index (CPI) in April, the US trade account in March, jobless claims over the week ended April 28, durable goods orders in March, factory orders in March and ISM services PMI in April.

The US dollar is expected to remain rangebound at highs in the short term, while base metals are likely to continue their weak and rangebound pattern.

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