Macro Roundup (Feb 4)

SHANGHAI, Feb 4 (SMM) – This is a roundup of global macroeconomic news last night and what is expected in the day ahead.

Last night

The US dollar recovered from two-week lows against a basket its rivals on Monday, as stronger-than-expected manufacturing data boosted investor sentiment. Fears about the coronavirus, meanwhile, eased after China took measures to cushion the impact of the new epidemic and pledged to do more to contain it and support the country’s financial markets.

LME base metals closed broadly lower overnight, reversing earlier gains in the wake of declines in their SHFE counterparts on the first trading day after the Lunar New Year holiday. Lead plunged 2.5% to lead the losses, zinc dropped close to 2%, aluminium fell 1.7%, tin shed 1.6%, nickel slipped 0.6% and copper dipped 0.01%.

SHFE base metals tumbled across the board on Monday. Copper shed 6.5% to lead the way lower, tin plunged 5.8%, lead dropped 5.2%, zinc fell 4.8%, nickel slid 4.2% and aluminium sank 3.7%. Night trading in China's futures market has been suspended since Monday February 3 until further notice.

Data out Monday showed the US manufacturing sector is in the midst of recovery, boosting investors’ risk appetite. The Institute for Supply Management’s final reading of manufacturing purchasing managers’ index (PMI) for January came in at 50.9, topping economists’ estimate of 48.5. Any reading above 50 signals an expansion.

China’s central bank unexpectedly lowered interest rates on reverse repurchase agreements by 10 basis points and injected 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo operations on Monday.

Chinese authorities also pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the virus epidemic, which has so far claimed more than 400 lives.

A private survey showed on Monday that China's factory activity expanded at its slowest pace in five months in January, while official data revealed that China’s industrial firms posted their first annual decline in profits in four years in 2019.

The Caixin manufacturing PMI eased to 51.1 from 51.5 in December. Analysts had expected a reading of 51.3. The findings, which focus mostly on small and export-oriented businesses, were slightly more optimistic than those in an official survey released on Friday, which showed growth had stalled. But they likely did not reflect the early impact of the public health crisis which flared in late January, which could weigh heavily on economic growth in coming months.

Industrial profits in China declining 3.3% on an annual basis to 6.1996 trillion yuan ($897.96 billion) in 2019, compared with the 2.1% dip in the January-November period, the National Bureau of Statistics (NBS) said on its website. It was first full-year decline since 2015 when profits fell 2.3%. The figures, however, predate the significant worsening of the coronavirus outbreak seen in January, which economists expect to seriously hurt economic growth in the first half of 2020.

As for the eurozone, manufacturing PMI readings came in at a nine-month high of 47.9 on Monday, but continued to dwell below the 50-point benchmark which represents growth.

Day ahead

US durable goods orders and factory orders data for December are slated for release today.