Futures Rise As More Weak Chinese Data Prompts More Stimulus Hopes

Tyler Durden's picture

If there was one thing that the market was demanding after last night's disappointing March HSBC manufacturing PMI, which has now fallen so low, local market participants are convinced a stimulus is imminent (despite China's own warnings not to expect this), and sent both the SHCOMP and the CNY surging, it would have been further weak data out of Europe, where the other possible, if not probable, "QE-stimulus" bank is located now that the Fed is in full taper mode. It didn't get precisely that however there was a step in the right direction when overnight the Euro area Composite Flash PMI eased marginally from 53.3 to 53.2 in March, largely as expected. The country breakdown showed a narrowing of the Germany/France Composite PMI gap owing to a notable (3.7pt) increase in the French PMI while the German PMI eased somewhat (1.4pt). On the basis of past correlations, a Euro area Composite PMI of 53.2 is consistent with GDP growth of around +0.4%qoq, slightly stronger than our Current Activity Indicator (+0.35%qoq).

The breakdown for Eurozone manufacturing is shown in the charts below:


The full European PMI breakdown via Goldman:

  1. The Manufacturing PMI fell by 0.2pt to 53.0, squarely in line with expectations. The services PMI also eased by 0.2pt to register a reading of 52.4 in March, slightly weaker than the consensus expectation of an unchanged figure.
  2. Developments in the forward-looking indicators were more positive than the headline figure. The new orders component within the manufacturing survey rose slightly by 0.3pt while stocks eased 0.4pt. Within services, 'business expectations' rose by 2.5pt while 'incoming new business' was up 0.4pt. ‘Business expectations’ in particular has risen notably in recent months and now stands at levels last seen around the spring of 2011. ‘Incoming new business’ has risen somewhat less and now matches levels seen around mid-2011.
  3. In addition to the Euro area aggregate, Flash PMIs were also released for Germany and France. Developments improved in France, which surprised notably on the upside by registering an increase in the Composite PMI from 47.9 to 51.6. Germany saw a small easing from a relatively high level as its Composite PMI eased from 56.4 to 55.0, a somewhat larger-than-expected decline. With these developments, the France/Germany gap narrowed substantially although France remains below the Euro area average and Germany is above (Charts 1 and 2).
  4. The final reading of the Euro area Composite PMI (which includes data for Italy and Spain) will only be available on April 3 (the final manufacturing PMI will be out two days ahead of the Composite reading). The area-wide figure released today (as well as the German and French equivalents) suggests around a 2pt decline in the services PMI in Italy and Spain and a broadly unchanged manufacturing PMI across the periphery.
  5. At a level of 53.2, past correlations would suggest Euro area GDP growth of +0.4%qoq. This is above our Current Activity Indicator (CAI), which points to a rate of expansion of around 1.4% (annualised) (0.35% non-annulised).

So for those wondering why futures have managed to regain virtually the entire lower closing gap from Friday's surprising late day tumble, now you know - more bad news masked with hopes that central banks will come in and fix things and this time it may actually work.

Other weekend headlines were relatively few and far between but there was some focus on French local elections, the ECB, geopolitical tensions in various pockets of the globe and ongoing corporate distress in China. Starting with France the far-right National Front party made significant gains in local elections in what is being spun as a backlash against Francois Hollande’s policies. The National Front party is reportedly ahead in some towns including the northern town of Henin-Beaumont which has historically voted for the left. All in all, the National Front is predicted to win half a dozen towns after next Sunday’s round two run-offs (Reuters). In terms of the ECB, Vice President Vitor Constancio, speaking on Saturday at a Fed-sponsored conference, said that the ECB will not adopt threshold-based rate guidance. Constancio also remarked that markets had mostly missed that the ECB actually strengthened its forward guidance at the March meeting, tying its accommodative stance to the closure of slack in the economy. In Ukraine, NATO’s commander in Europe warned on Sunday that Russian forces just to the east of Ukraine were “very, very sizeable and very, very ready”. This came after pro-Russian forces seized a couple more of the remaining military bases in Crimea held by Ukrainian troops on the weekend. In Asia, there were reports that more Chinese onshorebonds will be suspended from trading after the Chinese corporate reporting season concludes in March-April. Indeed there is talk that some 24 bonds from 19 Chinese domestic issuers are in danger of having their bonds suspended in the near future (IFR).

Headline bulletin from RanSquawk and Bloomberg

  • At 0700 GMT Bunds opened lower and index futures opened higher following gains of 1.8% in the Nikkei 225 and 0.9% for the Shanghai Comp.
  • Asian gains were made following Chinese PMI exports rebounding for the first time in 4 months (although the headline manufacturing number was softer) and the CNY saw the best one-day session in over two years which eased fears in the market following last weeks concerns of TRF winds.
  • From 0900 GMT EUR/USD and equities headed lower following a weak German PMI reading, weak EU services PMI and dovish comments from ECB's Liikanen.
  • Focus is back on Russia where there has been press speculation that Moldova may be the next ex-Soviet republic in sight for Putin. This has pushed Palladium (of which, Russia corners over 40% of the market) to three-year highs topping USD 800/oz.
  • Treasuries decline, 10Y yield holding just above 100-DMA; 5Y at highest since Jan. 9 before U.S. sells $109b in 2Y fixed/FRN, 5Y and 7Y notes beginning tomorrow.
  • China’s manufacturing weakened for a fifth straight month, with the HSBC/Markit PMI dropping to 48.1 from 48.5, est 48.7
  • Chinese stocks rebounded from initial losses on speculation that weakening growth will prompt policy makers to reconsider their aversion to broad stimulus measures
  • Ukraine’s foreign minister said the risk of war with Russia was growing as world leaders gather in The Hague to discuss  the situation amid growing concern over a Russian buildup on its neighbor’s border as pro-Kremlin troops seized a Ukrainian base in Crimea
  • Growth in euro-area manufacturing and services stayed close to the fastest since 2011 in March as France improved
  • Fang Fang, JPMorgan’s CEO of investment banking for China, is leaving after more than 12 years at the firm
  • Sovereign yields mostly higher. Asian equities rise, Nikkei +1.8%, Shanghai +0.9%. European equity markets decline U.S. stock-index futures gain.  WTI crude and copper steady, gold lower

US Economic Calendar

  • 8:30am: Chicago Fed National Activity Index, Feb.,  est. 0.10 (prior -0.39)
  • 9:45am: Markit U.S. PMI Preliminary, March, est. 56.5 (prior 57.1
  • 9:00am: Fed’s Stein speaks in Washington Supply
  • 11:00am: Fed to purchase $500m-$750m notes in 2024-2031 sector

Asian Headlines

USD/CNY posts its biggest daily loss in over two years supported by a stronger CNY fix for the first time in 5 days and China vice-finance minister Zhu Guangyao that CNY does not face potential for big depreciation. On a similar topic, hopes of stimulus from China continue to pervade despite the Chinese Finance Minister Jiwei stating China will not use large fiscal stimulus to spur investments.

Chinese HSBC Manufacturing PMI came in softer than expected at 48.1 vs. Exp. 48.7 but the market focussed on export orders which rose for the first time in four months.

EU & UK Headlines

German PMI missed on both Manufacturing (53.8 vs. Exp. 54.6) and Services for (54.0 vs. Exp. 55.5), France beat on both headline numbers (51.9 vs. Exp. 49.8 and 51.4 vs. Exp. 47.5 respectively) and Eurozone PMI was in-line for Manufacturing but Services missed at 52.4 vs. Exp. 52.6.

Barclays preliminary pan-Euro agg month-end index extensions: (+0.07y) (12m avg. +0.08y)
Barclays preliminary Sterling month-end index extensions:(-0.02y) (12m avg. +0.06y)

US Headlines

Barclays preliminary US Tsys month-end index extensions:(+0.07y) (12m avg. +0.08y) Equities

European equities trade lower (Eurostoxx50 -0.67%) despite the positive Asia-Pacific performance, with relatively even losses seen across the European bourses. Basic materials and health care are the worst performing sectors.

Worth noting that even though Russia's MICEX opened higher by 0.7% and was up nearly 2% at at its highs it has since retraced to gains of 0.1% as the market looks to digest concerns that Russia may focus on another ex-Soviet state Moldova.

Analysts at MKM point out that heading into the last full week of Q1, the S&P500 is trying to record its 5th consecutive quarterly gain, something that has only occurred five times in the last 50 years.


EUR/USD weakened following PMI's out of EU and Germany and dovish comments from ECB's Liikanen while the USD gained ground (+0.1%). CHF was umoved on comments from the SNB that the CHF is still overvalued and the IMF that the SNB could introduce negative rates on renewed CHF pressure. UBS stated the USD is primed for a major rally in the coming months as Fed Chair Yellen implied 1st hike could happen as early as Q2 2015.


Both WTI and Brent trade positively, with closed Texas shipping channels reducing supply to US refiners, reversing some of the minor losses suffered last week. Elsewhere spot palladium touches USD 800/oz but
Gold is down USD 10 to USD 1323. NATO's top military commander said Russia had built up a "very sizeable" force on its border with Ukraine and Moscow may have a region in another ex-Soviet republic, Moldova, in its sights after annexing Crimea. (RTRS) Over the weekend Merkel has warned Putin about de-stabilizing Moldova. However, the Russian ambassador to the EU said Russia has no intention to enter other parts of Ukraine. (BBG)

* * *

In conclusion, here is the complete overnight recap from DB's Jim Reid

Overnight the preliminary HSBC Chinese manufacturing PMI for March was released which disappointed relative to market expectations (48.1 vs 48.7 expected). The PMI is down 0.4 pts MoM and down 3.5 pts YoY which is disappointing to those who expected the PMI to bounce back after potential  Lunar New Year seasonal distortions in January and February’s data. Asian stocks and credit edged lower following the data but overall the market reaction has been limited, potentially because the weak PMI has renewed calls for the Chinese authorities to expand fiscal spending this year. We note though  hat the Chinese Finance Minister Lou Jiwei ruled out large fiscal stimulus in a speech at a development forum in Beijing yesterday, instead stressing Beijing’s commitment to carrying out reforms. The Nikkei (+1.9%) is leading gains in Asia after reopening from its long weekend, and Chinese banking stocks are underpinning the Shanghai Composite (+0.5%). Chinese bank stocks have been buoyed by news that the government may allow banks to issue preference shares to open up an additional source of funding. The underperformers post-PMI are copper futures (-0.3%) and the AUDUSD (- 0.05%) but initial losses have been pared.

The weekend commentary devoted substantial ink to discussing the exact meaning of Yellen’s “six months” remark at last Wednesday’s FOMC press conference. This was spurred by the St Louis Fed’s Bullard’s comments on Friday where he suggested that Yellen’s “six month” estimate of the interval between QE ending and the first rate hikes was an assessment that was in line  with private sector surveys. Bullard’s comments on Friday precipitated a brief wobble in the S&P500 (-0.29%) late in the session. The weekend commentary suggested that perhaps Yellen had made a “gaffe” in her first press conference as Fed Chair (CNBC). Despite Bullards’ comments, Reuters said on Sunday that its survey of economists shows that Yellen's comments have not altered their views. Ten dealers of 17 polled see rate hikes in the second half of 2015, with another four saying increases would not start until 2016.

Previewing what’s in store for the rest of the week, we have the release of the flash global manufacturing PMIs today in the Euroarea and US. Further out on the data docket, the release of US new homes sales and consumer confidence comes tomorrow, durable goods orders on Wednesday, initial jobless claims and Q4 GDP (3rd estimate) on Thursday, followed by personal income/spending data on Friday. In the Euroarea, German IFO will be released on Tuesday, followed by the ECB’s February money supply report and UK retail data on Thursday. Japan reports CPI on Friday. In China, the focus will be on Chinese bank earnings announcements throughout the week.

On the diplomatic front,. President Obama attends a G7 meeting in The Hague this week, called in response to the crisis in Ukraine. Obama will also meet with leaders from 20 nations to discuss nuclear security. In terms of the Fed, DB’s Joe Lavorgna notes that we have an eventful week of Fedspeak lined up.

This week’s lineup includes Atlanta Fed President Lockhart (non-voter) and the Philadelphia Fed’s Plosser (voter), who will both be speaking on the economyand monetary policy tomorrow. Bullard speaks on Wednesday afternoon where we may get some clarification of his comments from Friday. Sandra Pianalto’s speech on Thursday will not be less relevant, despite her impending retirement from the Cleveland Fed, because she is a useful bellwether of the moderates on the Committee. Chicago Fed President Evans (non-voter), one of the more dovish of the regional Presidents, also speaks on Thursday. Kansas City’s Esther George (non-voter), a well- known hawk, is the last scheduled Fed  speaker on Friday afternoon. Elsewhere the Fed releases its Comprehensive Capital Analysis and Review on Wednesday which provides its assessment on bank’s ability to keep making dividend payments and funding share buy backs.

In the EM space, our strategists highlight two bellwether trade reports this week which will shed more light on regional Asian trade. Thailand and Hong Kong are expected to see a boost in exports after earlier reports were affected by poor weather and seasonal one-offs. In EMEA, there are rate meetings in Israel (Mon), Hungary (Tue), South Africa (Thu), Czech Republic (Thu) and Romania (Fri). There will also be landmark local elections held in Turkey (Sun) which are being viewed as a referendum on the future of PM Erdogan’s

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GetZeeGold's picture



Things are looking bad....which of course is bullish.

Greshams Law's picture

Downright horrible...Buy! Buy! Buy!

BandGap's picture

Charlie don't surf and China don't miss. In pre-bizarro world days this would have been a disaster. Now, meh.

post turtle saver's picture

this whole report is so much blah blah... here's all you need to see:


“Subprime risks are contained.” Ben Bernanke 2007

“Risks in China’s bond market are generally controllable.” Zhang Xiaojun 2014


strap in tight folks, the ride gets bumpy from here

Winston Churchill's picture

Markets just can't take no for an answer.

firstdivision's picture

Soooo...what happens when the PBOC doesn't rub the market's clit to stimulate it?

Greshams Law's picture

Yellen has the solution to Quantitatively Ease it right in.

rsnoble's picture

More drugs the patient is flopping around!

new game's picture

so all this freashly created debt is stimulating the economy and bring down unemployment, ya sure, all good in the neighborhood....ask the spanish. ask the italians. ask the french. ask an american. ask an autralian to be laid off as china slowly sinks. ask a chinaman that just moved to the city? ask the robot that just got pluggedin...ask janet!

Hindenburg...Oh Man's picture

It's almost hard to believe that one week ago, pre-market, we were up to 1392 on gold, and the mining stocks were right there with it--riding on somewhat recent highs. 1 week later the beatings seem to continue. The pattern for geopolitical unrest continues---negative action Fri-Sat, some concern Sunday, then by market open the world shrugs, futures run higher and gold tanks thanks to more geopolitical "stability" and economic "growth." I shake my head....

GetZeeGold's picture



Putin might be the man.....but he didn't get the gold.


Who runs Bartertown?


No it's not Obama.....guess again.

ParkAveFlasher's picture

Putin run Bartertown, if I may, Putin has energy and energy control, which means he may control regional manufacturing via being the only one who could power it affordably.  I have seen with my own eyes how European firms are seeking to shift production from Putin-gas-dependent nations to those like Spain who are primarily powered by non-Putin sources.  In the quest for power, they do not care a fig for price offsets meaning they are screwed either way; without Putin they face natural shortage and the implicit price increase but this is not their concern.  Europe is a blanched reef in slowly stagnating currents.

post turtle saver's picture

I'll tell you exactly where Euro firms are moving mfg to... they're moving to the US

anecdotal evidence... try to buy a BMW SUV that's not made in the US... answer: you can't, they're all made here

cheap energy, a labor force cost that's become more competitive recently, relatively good political & economic stability in spite of the commie in chief's best efforts to make it otherwise (that shit will be fixed in short order after these next two election cycles, btw), logistics technology second to none, and last but not least they'll just sell in the US anyway - that's where $10 trillion in consumer activity lives after all, in spite of the Great Recession and all the stupid crap that's come along with it

I'll repeat what someone else here said many many articles back... "the US has resources"... the US isn't perfect, it isn't #1 in everything, there's certainly a ton of things that need fixing, but man oh man that baseline... just too hard to walk away from

ParkAveFlasher's picture

The fact that you can't but a non-US origin BMW could easily be a function of energy prices (cost to ship tons of raw materials or finished goods).  More to the point, who has the energy makes the rules, who has the gold rents them.

The US has been handcuffed in many ways, by itself primarily.  The financial might of the US is backed not by its own consumerism but by its own industry, that is not Asian.  I 100% agree that independent industry is the only way to free ourselves of financial bondage. 

MFLTucson's picture

Nice to see that value continues to be determined by the possibility of more money printing, not new innovations or growth of market.  What a joke these markets have become!

wmbz's picture

Clearly what needs to happen is the bloated U.S. consumer needs to pick their fat ass up off the couch. Switch off dancing with the wanna be stars then head to Wal-Mart and buy more cheap plastic crap with money they don't have, for things they don't need. It's really just a SNAP! Rally on!

thestarl's picture

They just don't get it. Stagnating wage growth, increasing casualisation of workforces everyfuckingwhere,oil 100usd/barrel,every cunt tapped out on debt,food inflation blah blah blah.

Anyone see any greenshoots, listen to the shit these arseholes come up with.

Rising Sun's picture

Like bringing a dead pig floating down the river back to life.


Bring it on commies - MOAR fucking stimulus....oh, and go fuck yourself China!!!!

jubber's picture

Metals just got hosed yet again...

yrbmegr's picture

Poster betrays a certain bias.  Weak economic data out of Europe was "a step in the right direction".  It seems this poster would like to see more stimulus.  But I doubt this poster will be gratified.  Europe is cushioning the blow a bit in the U.S. from the collapsing Chinese economy, so we are not yet seeing a driving force for the Fed to taper the taper.