Daily Market Report 04/02/2014


Fears of an emerging market crisis and a global slowdown have driven world stock markets down into correction territory, as investors begin the week in a nervous mood. The outbreak of nervousness in risk assets has been attributed mainly to a combination of Fed tapering, slower Chinese growth concerns and emerging market currency volatility. All of these factors have contributed to investors moving to the safe haven of the US dollar.

The US had further bad news after Markit reported that the US manufacturing PMI came in at a three-month low of 53.7 last month, down from December's 55.0. That suggests the pace of expansion slowed during the rough winter weather, with some firms blamed disruptions from the extreme weather conditions at the start of January. Export orders also fell, but more encouragingly firms kept hiring.


Europe's manufacturing sector continued to recovery in January, data firm Markit has reported, with the strongest rise in activity since May 2011. The index was up to 54, higher than December’s figure of 52.7. This was led by positive figures from Greece, Germany, Italy and Spain. As a result the euro had a strong day against the pound.


Britain's factory recovery continued in January with a faster rise in new orders, although the pace of the increase slowed a little in January with the UK PMI coming in at 56.7. This was lower than expectations and as a result we saw the pound weaken off against most of its counterparts.


Earlier this morning the Reserve bank of Australia kept interest unchanged at 2.5%. UK construction also expanded further in January to 64.6, boosting the pound in early trade. At 10am Italy is releasing their January inflation figures. This afternoon we have US factory orders expected to show a contraction after the impact of the US weather in December had a detrimental impact on the US economy.

Key Announcements:

10.00am – EUR – Italian Consumer Price Index (Jan): Expected to remain at 0.7%.

10.00am – EUR – Producer Price Index (Dec): Expected to improve to -0.9%.

15.00pm – USD – Factory Orders (Dec): Expected to have fallen by 1.9%.