1st Apr 2014 06:53
(Clarifying Aberdeen Asset Management has not yet released its trading statement. The fall in assets under management occurred in its first quarter and was previously reported.)
LONDON (Alliance News) - UK stocks look set to open higher Tuesday despite data overnight confirming China's manufacturing industry operating at an eight-month low, and with European unemployment data ahead.
The manufacturing sector in China continued to contract in March, the final reading from the HSBC purchasing managers' index revealed on Tuesday - coming in with a score of 48.0 and contracting for the third straight month. That was shy of forecasts for 48.1, which the PMI's preliminary reading suggested earlier this month, and down from 48.5 in February.
"The final reading of the HSBC China Manufacturing PMI in March confirmed the weakness of domestic demand conditions. This implies that first-quarter GDP growth is likely to have fallen below the annual growth target of 7.5%. We expect Beijing to fine-tune policy sooner rather than later to stabilize growth," said Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC.
In contrast to the HSBC number, the manufacturing PMI from the Chinese government held above the 50.0 expansion level, with a reading of 50.3 in March, up slightly from 50.2 in February.
The expectation of support from the Chinese government appears to be supporting equities. Despite the disappointing data, the Chinese Shanghai Composite index is up 0.4%, and the Hang Seng is up 0.8%.
Spreadbetters are indicating that UK stocks will follow higher, with the FTSE 100 called to open 0.4% higher at 6,628.50.
Equity markets were soothed Monday by comments from Federal Reserve Chair Janet Yellen.
Yellen said the US economy will need "extraordinary support for some time to come", and the recovery still feels like a recession to many Americans - suggesting that the unemployment rate is overstating the strength of the labour market.
Back on March 19, at the press conference that followed her first FOMC meeting as chair, Yellen spooked the markets by hinting that the Fed's first interest rate hike could be as soon as six months away from the end of tapering, prompting investors to sell equities and buy the dollar. However, with the market still getting used to the new Fed chair's communication style, Monday's comments were taken as more dovish, and equity markets moved higher.
On Tuesday, the European manufacturing sector will be in focus throughout the morning, with a raft of Markit PMI's for March due for release. The Spanish print is out at 0713 GMT, followed by the Italy at 0745 GMT, and France at 0750 GMT. The German number is due at 0755 GMT, with the eurozone-wide print at 0800 GMT.
All of those individual numbers are expected to come in above 50.0, which would put France in expansion territory for the first time in more than two years. German manufacturing activity is expected to have slowed slightly to 53.8, from 54.8, with the eurozone as a whole also expected to have slowed marginally to 53.0 from 53.2 in March.
European unemployment will also be in focus, with German numbers out at 0755 GMT and expected to show a further drop in unemployment of 10,000, following the 14,000 fall in February. The headline rate of unemployment in Europe's largest economy is expected to remain stable at 6.8%. The eurozone unemployment rate, due out at 0900 GMT, is expected to have remained stable at 12% in February.
The UK Markit manufacturing PMI is due at 0830 GMT, with economists expecting the index to remain stable at 56.9 in March.
The index rose to its current level from 56.6 in February despite softer production and new orders data. "The rise reflected an acceleration in the pace of hiring as some firms reported signs of capacity constraints," said Lloyds Bank UK macroeconomist Nikesh Sawjani. With this in mind the economist suggests there is more risk of a slightly softer print Tuesday, although UK growth clearly still remains strong.
From the US, following Monday's disappointing Chicago PMI report, the Markit manufacturing PMI is due at 1258 GMT, followed by the ISM manufacturing PMI at 1400 GMT, with construction spending data also due at 1400 GMT.
"The question is whether the US will start to show more convincing signs of a rebound in activity as it recovers from a severe winter," said Lloyds Bank's Sawjani.
With the UK corporate earnings season officially closed, there are no scheduled company results Tuesday. However, Aberdeen Asset Management and and ICAP are due to release trading updates.
By Jon Darby; [email protected]; @jondarby100
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