Archive - Jul 2011 - Story

It seems that the global economic decline is not limited to the Japapense maanufcaturing base: as expected in a globalized world, manufacturing weakness has now spread to both China and the UK, whose PMI indices are both fractionally above stagnation. On China: "China's official Purchasing Managers Index fell to a 28-month low to 50.9 in June, (below expectations) with the imports index tumbling to 48.7, the lowest since August 2010. It was followed shortly after by the HSBC China manufacturing PMI for June, which slid to 50.1, marking the lowest level since the second quarter of 2009. The drop was sttributed to: "falling liquidity levels, higher interest rates and shrinking tighter
credit availability." Which means that the PBoC will be forced to act to rekindle its industrial base even as prices are still not under control and the upcoming inflation print is expected to come north of 6%. The UK's own PMI also was below expectations, coming at 51.3 on consensus of 52 and below May's 52.3 "The CIPS Manufacturing Purchasing Managers Index (PMI), a composite index measuring manufacturing activity, came in at 51.3 in June, down from a revised 52.0 in May, hitting its lowest level since September 2009...UK manufacturing sector activity growth has slowed dramatically in the CIPS series since early 2011. In February the headline index posted 61.5, matching January's record high for the series. In March the manufacturing PMI posted 56.4, then 54.4 in April, then the revised 52.0 in May, its lowest reading since September 2009. Now it has fallen to 51.3 in June, just 1.3 points above the 50 stagnation level." As a result the central banker dilemma is now at its peak, as the banking cartel is unclear if it should hike rates and stimulation inflation, or further lower and cause outright stagnation. As we said a few weeks ago, this is what centrally planned stagflation looks like. But luckily we have the US, whose Chicago ISM is expected to once again indicate a reverse decoupling is the name of the game for a few months, as despite a global economic contraction, the US is somehow growing, despite the end of QE2 and no fiscal stimulus anywhere on the horizon.

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge