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Not so Happy New year; China manufacturing slowdown - EMEA Brief 2 Jan

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  • Asian equities began the new year in the red as Chinese manufacturing had a worse December than expectations, PMI dropped to 49.7 from 50.2 in November. Hong Kong's Hang Seng fell by 2.4% and the Shanghai Composite declined by 1.2%, while the ASX 200 dropped by 1.6%.
  • S&P futures mirrored the performance of Asian stocks and fell 0.9%, erasing earlier gains after Donald Trump indicated he may be willing to strike a deal to end the government shutdown in the US.
  • Indian stocks also dropped as fiscal deficit concerns grow due to lower tax collection and a potential farm relief package proposed by Prime Minister Narendra Modi, whom is seeking re-election this year. The NSE Nifty 50 declined by 0.3%.
  • The yen reached a six month high at 109.36 per dollar, rising 0.3%. The Aussie dollar fell 0.5%, whilst the Euro and pound were both down around 0.15% each.
  • Investors 'safe haven' gold rose 0.3% to $1,286.04 per ounce.
  • WTI crude slipped to $44.97 per barrel, falling around 1%, whilst Brent crude futures were down 1.4% to $53.05.

Asian overnight: Investors started the year concerned about the global economy coming off the back of the worst year for equities we have seen since the global financial crisis in 2008. China's manufacturing contracted for the first time in 19 months in December as a result of continued trade tensions between the US. Results from the Purchasing Managers' index (PMI), dropped to 49.7 in December, a reading below 50 generally indicates a contraction in manufacturing activity.  The director of macroeconomic analysis at CEBM group explained that the results "showed external demand remained subdued due to the trade frictions between China and the U.S., while domestic demand weakened more notably". 

UK, US and Europe: An annual survey conduced by the Financial Times has shown that economists are shying away from making forecasts regarding the outlook for the UK economy this year. Results highlighted that the majority of the economists that took part in the survey did not give a firm prediction for UK GDP for 2019, amid concerns over uncertainty around Brexit and global trade tensions. Looking ahead, we have a busy day ahead for data releases with PMI numbers due in the morning for the UK, Italy, France, Germany and Eurozone, the times of the releases can be seen below. 

Economic calendar - key events and forecast (times in GMT)

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Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Deutsche Telekom has filed a lawsuit over a 5G auction against the German government, highlighting issues with a set of preconditions for participating in the auction.
  • China National Tobacco Corp, the biggest cigarette maker in the world, has announced plans to IPO it's international business unit on the Hong Kong stock exchange.
  • According to the Times, Iceland is facing a £21m bill for breaching minimum wage rules as staff voluntarily had sums taken from their wages which was then paid into a savings scheme, meaning pay had fallen below the national minimum wage.
  • Playtech, a gambling software company, will pay £25.2m in a tax settlement with Israeli authorities following an audit of its financial accounts.

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