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August 1, 2016

Lackluster Mfg. PMI sends CSI 300 down, greenback is under pressure ahead of ISM

Lackluster Mfg. PMI sends CSI 300 down, greenback is under pressure ahead of ISM

Chinese Manufacturing PMI fell in July to 49.9 points from 50 points a month earlier showed the data of China National Bureau of Statistics.

The indicator dropped below 50 points indicating decline in activity of the industrial sector first time in five months. Median estimate of the experts interviewed by WSJ projected an increase to 50.1 points.The reading below 50 mark indicates decrease in activity, while above 50 – expansion of the sector. Another similar index calculated by Caixin Media and Markit rose to 50.6 points in last month from 48.6 points in June.Local stock index CSI 300 fell on the data by 0.85% to 3,176.81 points.

Futures on US Dollar tumbled to a monthly low of 95.45 on Friday as lackluster GDP and Personal Consumption data dampened hopes for a rate liftoff this year. Yeat-to-Year US GDP for a second quarter rose by 1.2%, half of the median estimate at 2.5%, while the growth of Personal Consumption for the same period slackened to 4.2%, missing a forecast of 4.4%.

 

US Dollar

Despite eroded optimism on US growth, the Chairman of the Federal Reserve Bank (FRB) of San Francisco John Williams doesn’t anticipate a recession in the US economy after seven years of continuous growth.

“I’m not worried that recession risks may increase in the next year or in the future, because there are no signals that the US economy is going in this direction”, – he said, speaking in Boston.Asked about the possibility of the FED’s move to the policy of negative interest rates, he said he believes it is unlikely in the United States and expects the hike rather than the cutoff  of Fed rates in the next few years.

According to Williams, the US economy is “doing well” and close to full employment with inflation around 1.5%, close to the target of 2%.”Currently, we are in a good position in recent years we have gone through a series of riots and still making progress.” – J.Wilyams said.

He noted that the statistical data on the US economy which will be posted in the coming months, could support  both two rate hikes, one rate hike or none at all.”The flow of data, which we will see in the next couple of months, in my opinion, will be speaking in favor of the two rate increases in 2016. It may be true that this does not happen, and the data will support only one rate hike or none at all. Time will tell “- quoted J. Williams Bloomberg.

The statement of the Federal Open Market Committee (FOMC) following the meeting pointed out that the Fed is still open to consider raising rates in September.

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