PMI data fails to inspire – 4th August 2015

Question: What is it that sends financial markets lower?

Answer : Selling currencies, stocks and share yes but not always as yesterday’s example demonstrates. Within minutes of the Athens stock market opening yesterday for the first time in five weeks stock index had fallen 23%. The reason wasn’t because investors were selling but their bids to buy were drastically reduced.

Given what has happened in Greece and the reasons why the markets were closed, the decline did not come as a surprise and therefore did no real damage to the Euro. The Euro did end the day losing a quarter of a cent lower on the day against Sterling.

It was the Aussie Dollar that came out on top with a gain of 0.8% after the Reserve Bank of Australia kept its benchmark interest rate steady at 2%. Investors had expected no change but they had not been ready for the delicate tone of the RBA statement, which included none of the usual bluster about the currency being overvalued.

The PMI data was pretty dull that came out yesterday and resulted in major currency movements limited to 0.3% or less. The UK manufacturing sector PMI came out at 51.9 which was ahead of expectations, as did the figures from Italy, Germany and the EU as a whole. Spain and the US fell short of forecast while Greece reported 30.2; hardly surprising given the bank closures last month.

With the manufacturing PMIs out of the way, and the services sector PMIs not due until tomorrow, the data calendar has a breather. The only significant data from North America is US factory orders, a figure which investors have recently found surprisingly easy to ignore.

The most interesting numbers come out tonight: services PMIs from Australia and China and the quarterly New Zealand employment data for Q2. The Kiwi often reacts to the jobs data, not always logically.