Summary for the 2nd of July


Released Caixin manufacturing PMI from China fell below 50 in June. The index was also below 50 earlier this year, the PMI increased in March, which the financial markets thought was due to the 
Chinese government’s economic measures taking effect. Though this might not be the case, the increase in PMI earlier this year might be due to the celebration of the Chinese new year of 2019, which had led to the manufacturing sector to lag on regaining the production. Once the manufacturing started again after the celebration, the regain was stronger than previous year.

Chinese government’s economic measures this year were difference than the previous years. The measures this year had been more selective. There were tax cut and increase public spending, but the government still tightened on the housing market, like where the local banks were not allowed to cut the mortgage rate, as well as the government’s tightening on shadow banking regulations, and led to difficulty for the private sector to get banking loans. All in all, the economic growth in China is still weak due to the trade conflict as well as a weak public consumption.

PMI numbers for the Eurozone were weaker than the released flash estimates last week. There was positive development in France, while the numbers from Germany, Italy and Spain had been on the weaker side. The new member of the Executive Board of the European Central Bank, Philip Lane, said yesterday that the package of monetary measures which the ECB had been introducing for the past years had contributed in the economic growth and inflation. The financial markets interpreted the statement that there would be more economic measures rather than just cutting the interest rate from the ECB in the future.

US ISM manufacturing data fell less than the market expected. New order index fell quite heavily, indicating a lower production growth to come. One of the chemical producers said that the tariffs were causing an increase in cost of goods, while a petroleum producer said the tariffs continued to be a challenge, saying how the implementation of Mexican tariffs would affect the cost on the Latin American business. A metal producer said the tariffs affected their growth forecast and future growth outlook for 2020. All this indicated a rate cut from the Fed.

Indices for 02.07.2019
Dow: +0.4% (1st of July)
S&P 500: +0.8% (1st of July)
Nasdaq: +1.1% (1st of July)
Nikkei: +0.2%  (2nd of July)
Chinese indices: +1.4% (2nd of July)
STOXX Europe 600 Index: +0.37% (2nd of July)

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