Macro Roundup (Oct 25)

Published: Oct 25, 2018 08:52 (GMT+8)
Macro Roundup

SHANGHAI, Oct 25 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The US dollar strengthened against the euro on Wednesday after European data signalled that economic growth could be waning across the eurozone.

US stocks plummeted on Wednesday as a sharp drop in tech shares and concerns about corporate earnings exacerbated this month's steep pullback.

Both LME and SHFE base metals ended in mixed performance overnight with LME nickel the biggest loser, down 1.45%. LME copper and zinc edged down while aluminium and lead nudged up and tin rose by some 0.5%. SHFE nickel also dropped over 1%, copper and aluminum dipped while tin edged up, lead increased by some 0.2% and zinc climbed close to 0.6%.

Markit's flash composite PMI for the eurozone tumbled to a 25-month low of 52.7 in October from a final September reading of 54.1, far short of the expected 53.9. Anything above 50 in the survey, which is regarded as a reflection of economic health, indicates growth.

The PMI across manufacturers also sank to a 26-month low of 52.1 from 53.2, as factory orders contracted for the first time since late-2014.

A similar gloomy picture emerged for the trade bloc's dominant services industry. The services PMI plummeted to a two-year low of 53.3 from 54.7 in September.

"The pace of eurozone economic growth slipped markedly lower in October, with the PMI setting the scene for a disappointing end to the year. The survey is indicative of GDP growth waning to 0.3% in the fourth quarter, and forward-looking indicators, such as measures of future expectations and new business inflows, suggest further momentum could be lost in coming months," said Chris Williamson, chief business economist at IHS Markit.

"The slowdown is led by a drop in exports, linked in turn by many survey respondents to trade wars and tariffs, which appears to have darkened the global economic environment and led to increased risk aversion. It is therefore not surprising to see the slowdown broadening out across the economy, hitting the service sector."

Markit's flash composite PMI for Germany fell to 52.7 in October from 55 in the previous month. This missed the forecast of 54.8 and was the lowest reading since May 2015, but still stood above the 50-mark that separates growth from contraction.

Growth in manufacturing slowed to a 29-month low of 52.3 in October as output and new orders posted their smallest gains since late 2014, the survey showed. The sub-index for business activity in services eased to a five-month low of 53.6.

"October's flash PMI results made for unpleasant reading, with data showing slowdowns in rates of growth across all the main measures of business performance: output, new orders and employment. The rise in overall business activity was the weakest in almost three-and-a-half years, reflecting not only a further easing of manufacturing production growth, but also a slowdown in the previously steadfast service sector,” said Phil Smith, principal economist at IHS Markit.

The services PMI in the US registered at a seasonally adjusted rate of 54.7 for the month of October, versus 53.5 in the previous month, representing a three-month high. IHS Markit’s reading for US manufacturing PMI came in at 55.9, the highest since May, exceeding economist expectations of 55.3. For the month of October, US composite PMI came in at 54.8, the highest since July and up from 53.9 in September.

"The flash PMI surveys indicate that the pace of economic growth gained momentum again in October after having been subdued mainly by adverse weather in September,”Markit's Chris Williamson said. "The headline PMI is running at a level broadly consistent with the economy growing at an annualised rate of 2.5%, boding well for another robust quarter of growth."

US house prices rose in August, up 0.3% from the previous month, the Federal Housing Finance Agency (FHFA) reported on Monday. This reading came in line with analysts' estimate.

The US Energy Department said that gasoline stocks fell 4.8 million barrels over the week ended October 19 to 229.3 million barrels, the lowest since December 2017. Distillates, which include diesel, were down 2.3 million barrels. The EIA data also showed US crude inventories rose 6.3 million barrels, much more than the expected 3.7 million-barrel increase.

Day ahead

Economic data slated for release today include Germany’s October Gfk consumer confidence and Ifo business climate, US weekly jobless claims, September durable goods orders, wholesale inventories and pending home sales. The ECB meeting is another key thing to watch.

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