Strong Chinese manufacturing data lift Asian markets - 3.1.2017

Dollar pulls back

US stock market was closed on Monday for New Year holiday. Stocks finished lower on Friday with the Dow Jones industrial average slipping 0.3% to 19762.60 but logging a 13.4% annual advance, best annual gain in 3 years. The Nasdaq fell 0.9% to 5383.12, posting 7.5% gain for the year. The dollar strengthened on the first trading day of the new year on Monday: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.5% to 102.823.

The dollar index gained around 3.5% in 2016, rallying to levels last seen in 2002. The dollar strengthened as the Federal Reserve hiked the rates in December for the second time in ten years and president-elect Trump’s proclaimed support for measures to stimulate US economy raised expectations of stronger economic growth. It is pulling back today. Important updates on the US economy are scheduled this week: the U.S. Institute for Supply Management’s December survey today and nonfarm payrolls for December on Friday. Today at 15:45 CET December final Manufacturing PMI will be released, the outlook is neutral for dollar. At 16:00 CET December ISM Manufacturing PMI and November Construction Spending will be published, the outlook is positive.

SP 500

Italian Banca Monte dei Paschi will issue €15 billion of debt

European stocks ended higher on Monday led by banking stocks in thin trading as many traders remained out for New Year’s celebration. Both the euro and the British Pound weakened against the dollar on Monday. The Stoxx Europe 600 index rose 0.5%, with the Bank sector up 0.6%. Germany’s DAX 30 index outperformed advancing 1.0% to 11598.33. France’s CAC 40 rose 0.4% while markets were closed in London and trading will resume today.

Bank stocks led the markets higher after news troubled Italian Banca Monte dei Paschi di Siena SpA will issue €15 billion ($15.77 billion) of debt in 2017 to help boost capital base. The bank’s shares remain suspended from trading. German banks also advanced, with Commerzbank shares rallying 3.5%. In economic news euro-zone manufacturing final Purchasing Managers Index in December remained at the highest level since April 2011. Today at 09:55 CET December unemployment change and unemployment rate will come out in Germany, the outlook is neutral for euro. And at 14:00 CET preliminary Consumer Price Index for December will be published in Germany, the outlook is positive for euro.

China’s Caixin Manufacturing PMI rises more than expected in December

Asian stocks are extending gains today buoyed by data indicating solid factory growth in China and Europe. Chinese stocks are rising with the Shanghai Composite Index up 1.0% and Hong Kong’s Hang Seng index gaining 0.7% after Caixin private business survey showed China's manufacturing activity expanded more than expected in December as demand accelerated, with output reaching a near six-year high. Starting on January 1, the Chinese central bank nearly doubled the number of foreign currencies in a basket used to set yuan’s value - to 24 from 13, with new entrants including the Korean won, the South African rand and the Mexican peso. Australian shares were the best performers in the region with Australia’s All Ordinaries Index up 1.2% despite a stronger Australian dollar. Markets in Japan were closed for an extended New Year holiday.

Oil prices advance

Oil futures prices are rising today in the first trading session of 2017 as traders are hopeful major oil procures will fulfill their agreement on output cut. January 1 was the official start of the deal agreed by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day. Non-OPEC member Russia's oil production in December remained unchanged at 11.21 million barrels per day (bpd), at its highest in almost 30 years, energy ministry data showed on Monday, but it was preparing to cut output by 300,000 bpd in the first half of 2017 as agreed in production cut accord. In 2016, output reached 547.499 million tonnes in total, or 10.96 million bpd, up from 10.72 million in 2015.