Market Drivers December 14, 2018
Europe and Asia
EZ: PMI 51.3 vs. 52.8
North America
USD: Retail Sales 8:30
A sea of red in capital markets today as risk-off flows drove Nikkei down by 2%, Dax down by 1% and took euro below the 1.1300 figure on very weak EZ Flash PMI data.
The selling in risk started early after Chine reported horrid results with Industrial Production printing at 5.4% versus 5.9% eyed while Retail Sales came in at 8.1% versus 8.8% forecast. The Trade War is clearly taking its toll on demand and Aussie quickly reacted to the news falling through the .7200 figure before finally bottoming out just ahead of the .7150 mark.
The news in Europe only added to the woes with French PMI sliding below the 50 Boom/Bust level for the first time since 2014. According to Markit,
“The anecdotal evidence provided in the December survey saw growing concerns over global trade and economic growth, rising political uncertainty, Brexit and tighter financial conditions. Widespread reporting was again seen of especially disappointing sales and production in the autos sector. Disruptions to business and travel in France arising from the ‘gilets jaunes’ protests meanwhile added to the weaker demand environment, contributing to the first fall in French business activity for two-and-a-half years. Output fell in both manufacturing and services. In Germany, output grew at the slowest rate for four years. The service sector maintained a slightly faster rate of expansion than manufacturing, despite the latter registering slightly improved production growth as firms increasingly ate into backlogs. New orders placed at German factories fell for a third month running, dropping at the steepest rate for just over four years.”
Although Mario Draghi put on a brave front at yesterday’s ECB Presser, the news out of Europe continues to turn darker by the day and the Brexit soap opera only adds to the pain on the continent as the prospect of a no deal Brexit could tip the whole region into a recession. EUR/USD remains below 1.1300 in morning London dealing but if risk flows do not improve the pair could test 1.1250 support as the day proceeds.