Intraday Market Thoughts

Euro Breaks 1.39, Awaiting Eurozone PMIs

by Kyle Morrison
Oct 24, 2011 7:43

European summits remain the focus as more meetings planned, Chinese Manufacturing PMI bounces back to expansion territory, Japanese September Trade balance returns to surplus, Australian Q3 PPI falls back as China slows. More developments in Friday's Premium Intermarket Insights below.

Todays publication of French, German and Eurozone October manufacturing and services PMI data is expected to show further weakness with particular focus on French data in the wake of ratings agency Standard and Poors warning on Friday about further economic deterioration putting at risk Frances blue chip triple A credit rating.

If as expected the PMIs show further weakness the above fears will increase. Manufacturing PMI expected to slip further into contraction territory to 48, from 48.2, while services PMI is expected to stall to around 50.4, from 51.5.

German PMI seen stalling around 50, while Eurozone data is expected to weaken further into contraction territory with services slipping to 48.5 and manufacturing to 48.1.

In China the latest HSBC manufacturing PMI for October climbed to 51.1, a five month high, from 49.9 in September with new orders also rising, indicating that the recent slowdown in manufacturing activity maybe starting to rebound and reducing fears of a hard landing.

After hitting another record high against the US dollar last week Japanese officials approved another 12trn yen stimulus package to counter the effects of the strong yen on the Japanese economy. The government also warned it retained the option to intervene in currency markets if the need arose. Todays publication of September trade balance to a higher than expected 300bn yen surplus after the previous months deficit was an encouraging sign but was still well below last years comparable figure and continues to highlight the problems the strong yen is bringing to an economy still struggling from the aftermath of the earthquake and tsunami earlier this year.

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In a sign of cooling Aussie inflationary pressures on the back of a slowdown in commodity prices and China, the annualised figure for PPI showed that prices fell by more than expected from 3.4% in Q2 to 2.7% in Q3. This suggests that this weeks CPI could also come in on the softer side and spell suggestions for RBA easing.


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