Better Asian PMIs Lift Risk Appetite as 2012 Kicks Off in Earnest

Markets opened with a sputter Monday with only mainland Europe open for business. Those equity markets that were open rallied between 2-3% but the EUR still remained soft in thin trading with EURJPY pushing strongly through the 100 mark to hit a new all-time low just below 99.50. Other risk currencies fared better with AUDUSD falling just short of the 1.03 handle and NZDUSD 0.78.

The EUR fared a tad better during Tuesday's Asian session as further improvements in Asia's PMIs extended the appetite for risk. During the weekend, China's official manufacturing PMI rebounded above the 50 mark to 50.3 after last month's dip to 49.0. The good news continued with Australia's manufacturing PMI performing strongly, rising to 50.2 from 47.8, the first time in six months it has overcome the 50 threshold. Finally, China's non-manufacturing PMI revealed a spectacular rebound to 56.0 having dipped to 49.7 from 57.7 in November. The data was enough to ensure a slow but steady move higher in risk currencies, including the EURUSD this time.

In other data, Singapore's advance GDP numbers were poor, but had been mostly expected by analysts and telegraphed by the authorities. Q4 GDP slumped 4.9% on a quarter-by-quarter basis (-5.0% expected) with Q3's numbers downgraded to +1.5% from 1.9%. On an annualized basis, growth came in a +3.6%, below the 4.3% expected and lower than the downwardly-revised 5.9% in Q3. Weak performers in Q4 were manufacturing (-21.7% q/q) which is to be extended given the current external economic climate, construction down 6.7% q/q while services rose 3.4% q/q. The Q4 data brings 2011 growth down to 4.8%, slightly below the government's 5% forecast and sharply lower than 201's 14.5%.

In other data yesterday, Sweden's PMI also improved from last month with a move to 48.9 from 47.6 while those from both Germany and the EU were not quite so convincing - German PMI up to 48.4 from 48.1 and EU-wide flat at 46.9. Note all Europe's PMIs are still below the crucial 50 contraction/expansion threshold.
Today's European data focuses on PMI data from Norway, UK and Switzerland along with minutes of the last Riksbank meeting (25bp cut) and Germany's unemployment rate. North America returns with construction spending, ISM manufacturing and prices paid along with the minutes of the last FOMC meeting.

Wishing you all a happy and prosperous 2012.

Data Highlights

• US Dec. NAPM - Milwaukee out at 57.8 vs. 58.3 expected and 56.7 prior
• China Dec. PMI Manufacturing out at 50.3 vs. 49.1 expected and 49.0 prior
• Sweden Dec. PMI out at 48.9 vs. 47.9 expected and 47.6 prior
• GE Dec. Final PMI Manufacturing out at 48.4 vs. 48.1 expected and 48.1 prior
• EU Dec. Final PMI Manufacturing out at 46.9, as expected and unchanged from prior
• AU Dec. AiG Performance of Manufacturing out at 50.2 vs. 47.8 prior
• SI Q4 Advance GDP out at -4.9% q/q, +3.6% y/y vs. -5.0%/+4.3% expected and revised 1.5%/5.9% prior resp.
• UK Dec. Lloyds Business Barometer out at -23 vs. -20 prior
• China Dec. Non-manufacturing PMI out at 56.0 vs. 49.7 prior

Upcoming Economic Calendar Highlights (All Times GMT)

• AU RBA Commodity Price Index (0530)
• Norway PMI (0800)
• Sweden Riksbank Minutes (0830)
• Swiss PMI Manufacturing (0830)
• GE Unemployment (0855)
• UK PMI Manufacturing (0930)
• US Construction Spending (1500)
• US ISM Manufacturing (1500)
• US ISM Prices Paid (1500)
• US FOMC Minutes (1900)