Intraday Market Thoughts

RBA Cuts, Chinese PMI Slips, UK Q3 GDP Next

by Kyle Morrison
Nov 1, 2011 9:10

RBA cuts rates, Chinese manufacturing PMI comes in mixed, UK Q3 GDP and manufacturing PMI, Ashrf will be on AlArabiya TV at 10:35 GMT, 14:35 Dubai TV. All 5 Intermarket trades hit targets.

The 25-bp rate cut from the Reserve Bank of Australia wasnt entirely unexpected given the concerns raised at previous meetings with respect to the global growth outlook. Last weeks reading on core inflation may well have made up policymakers minds for them, coming in as it did at its lowest level for years. With concerns about a China slowdown and subdued consumer demand the RBA has decided to mitigate this with an easing of policy, especially as yearly house prices are also showing signs of cooling, down 2.2% in Q3.

Chinas manufacturing PMI continues to give mixed signals about the Chinese economy. There have been concerns that the economy, while slowing down wasnt in danger of a hard landing, however this mornings figures do raise a slight concern. The HSBC PMI numbers for October showed some improvement, coming in at 51 from the previous 49.9, but the official measure disappointed, coming in at 50.4, well below expectations of 51.8.

The first reading of UK Q3 GDP is seen +0.3%, from Q2s 0.1%. At around the same time the latest manufacturing PMI data for October is also due out with fears that the sector could well slip into contraction territory from Septembers 51.1 reading. The expectation is for a reading of 50, but given the October decision by the Bank of England to restart its asset purchase scheme, it does suggest that the Bank of England remains sufficiently worried to act quickly in an attempt to try and head off a slump.

Nationwide house prices showed an annual rise of 0.5% for October, reversing a fall of 0.3% in September.

All EURUSD, USDCAD and gold trades hit their targets. Our Intermarket Insights can be accessed directly here: NONsubscribers can join here:

In Europe the single currency has come under increased pressure after last nights surprise announcement of a referendum by the Greek PM on the new bailout package. Given the weak economic outlook more uncertainty is the last thing the market and the European economy needs in light of the OECD growth downgrade and comments yesterday. This uncertainty seems likely to continue now given that any referendum is unlikely to happen before the end of the year. The final October manufacturing PMI data from Germany and the Eurozone later this week are expected to be confirmed in contraction territory at 48.9 and 47.3 respectively.

Later in the day the Fed start their last two day meeting of 2011, while the latest ISM manufacturing data will be awaited for a continued improvement from Septembers surprise rise.


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