The manufacturing sector which started showing signs of stabilization in the initial phase of 2016, started to cool down lately. The JPMorgan (NYSE:JPM) global manufacturing purchasing managers index (PMI), dipped to 50.0 in May from 50.1 in April (read: Global Manufacturing Picks Up: ETFs to Watch).
Though this signifies growth as any reading at or above 50 suggests expansion in activity, such feeble growth and a deceleration definitely stoke concerns. Soft demand in the wake of global growth worries can be held responsible for the overall global manufacturing slowdown. Though the U.S. economy was better placed in the developed economies’ pack, the situation in the other big economies is somewhat unsteady.
U.S.
As per Markit, the U.S. manufacturing PMI declined to 50.7 in May from 50.8 in April. Markit also noted that U.S. industrial output declined in May at the quickest pace in over six-and a-half years.
With the greenback gaining strength lately, the scenario could be dull in the coming months. Sizable capex cuts by energy companies to fight back the plunge in oil prices have probably hurt the U.S. manufacturing sector.
However, as per the Institute for Supply Management (ISM), the reading was 51.3 in May, up from 50.8 recorded in April.
China
Coming to the second largest economy of the world, the situation is more stressful. After posting sluggish factory output data since July 2015, the economy posted growth in March, going by official data.
But the Caixin China manufacturing PMI was 49.2 in May versus 49.4 in April. However, government's official manufacturing PMI in May remained unchanged from April at 50.1. The figure was the lowest since February, as per CNBC.
Euro Zone
The final Markit Eurozone Manufacturing PMI came in at 51.5 in May 2016, slightly lower than 51.7 in April. The latest figure is the lowest in three months. New business growth cooled down to a 15-month low while the employment picture was also sluggish.
Japan
The Markit/Nikkei Final Japan Manufacturing PMI was 47.7 in May versus the final data of 47.6 in April. May saw the fastest fall since January 2013 as output plunged the most in 25 months while new orders shrank at the quickest clip in 41 months (read: IMF Cuts GDP Outlook for Japan; ETFs in Trouble?).
Needless to say, such drab data in the world’s key regions give us reasons to look at the below-mentioned international industrial ETFs. These ETFs might be under pressure in the days to come (see all industrials ETFs here).
iShares Global Industrials ETF (EXI)
The $181.3-million ETF is heavy on the U.S. which takes about 54% of the basket. Japan, France and U.K. take the next three positions with a single-digit weight.
SPDR S&P International Industrial Sector ETF (IPN)
The fund looks to track the S&P Developed Ex-U.S. BMI Industrial Sector Index. The $16-million ETF is heavy on Japan with about 33.1% weight. U.K., France and Germany take the next three spots with about 9.8%, 9.7% and 7.2% weight, respectively. Siemens AG (DE:SIEGn) (3.66%), ABB Ltd. (2.05%) and Canadian National Railway Company (2.03%) are the top three stocks of the fund.
ISHARS-GLBL IND (EXI): ETF Research Reports
SPDR-SP I INDUS (IPN): ETF Research Reports
Original post
Zacks Investment Research
Though this signifies growth as any reading at or above 50 suggests expansion in activity, such feeble growth and a deceleration definitely stoke concerns. Soft demand in the wake of global growth worries can be held responsible for the overall global manufacturing slowdown. Though the U.S. economy was better placed in the developed economies’ pack, the situation in the other big economies is somewhat unsteady.
U.S.
As per Markit, the U.S. manufacturing PMI declined to 50.7 in May from 50.8 in April. Markit also noted that U.S. industrial output declined in May at the quickest pace in over six-and a-half years.
With the greenback gaining strength lately, the scenario could be dull in the coming months. Sizable capex cuts by energy companies to fight back the plunge in oil prices have probably hurt the U.S. manufacturing sector.
However, as per the Institute for Supply Management (ISM), the reading was 51.3 in May, up from 50.8 recorded in April.
China
Coming to the second largest economy of the world, the situation is more stressful. After posting sluggish factory output data since July 2015, the economy posted growth in March, going by official data.
But the Caixin China manufacturing PMI was 49.2 in May versus 49.4 in April. However, government's official manufacturing PMI in May remained unchanged from April at 50.1. The figure was the lowest since February, as per CNBC.
Euro Zone
The final Markit Eurozone Manufacturing PMI came in at 51.5 in May 2016, slightly lower than 51.7 in April. The latest figure is the lowest in three months. New business growth cooled down to a 15-month low while the employment picture was also sluggish.
Japan
The Markit/Nikkei Final Japan Manufacturing PMI was 47.7 in May versus the final data of 47.6 in April. May saw the fastest fall since January 2013 as output plunged the most in 25 months while new orders shrank at the quickest clip in 41 months (read: IMF Cuts GDP Outlook for Japan; ETFs in Trouble?).
Needless to say, such drab data in the world’s key regions give us reasons to look at the below-mentioned international industrial ETFs. These ETFs might be under pressure in the days to come (see all industrials ETFs here).
iShares Global Industrials ETF (EXI)
The $181.3-million ETF is heavy on the U.S. which takes about 54% of the basket. Japan, France and U.K. take the next three positions with a single-digit weight.
SPDR S&P International Industrial Sector ETF (IPN)
The fund looks to track the S&P Developed Ex-U.S. BMI Industrial Sector Index. The $16-million ETF is heavy on Japan with about 33.1% weight. U.K., France and Germany take the next three spots with about 9.8%, 9.7% and 7.2% weight, respectively. Siemens AG (DE:SIEGn) (3.66%), ABB Ltd. (2.05%) and Canadian National Railway Company (2.03%) are the top three stocks of the fund.
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ISHARS-GLBL IND (EXI): ETF Research Reports
SPDR-SP I INDUS (IPN): ETF Research Reports
Original post
Zacks Investment Research