Morning Brief – More soft PMI data during Asian session

During the Asian session, the market moves were fairly muted, as the effect of the FED, European Central Bank, and Bank of England continued to reverberate.

Mostly, the market was focused on PMI data from Australia and Japan during the Asian session. Both were weak. The market now looks to PMI data from a raft of eurozone economies.

Breaking down the Asian PMI data, the au Jibun Bank Japan Manufacturing Purchasing Managers Index edged down to 48.8 in December 2022 from a final 49 in November, a preliminary reading showed.

This was the second straight month of contraction in factory activity, and the steepest pace since October 2020, amid ongoing reports of muted customer demand while both output and new orders fell solidly, despite at slightly softer rates than November.

Input buying declined at the fastest pace since September 2020. Meanwhile, employment increased at a softer pace, with backlogs of work declining at a slower rate. On the pricing front, input cost inflation eased to a 15-month low, while output cost inflation slowed to a nine-month low. Finally, business sentiment weakened to the lowest level in eight months.

The Australian PMI was also extremely weak. The Ai Group Australian Performance of Manufacturing Index fell to 44.7 in November of 2022, from 49.6 in the previous month. The latest reading pointed to the fastest contraction in the country’s manufacturing sector since May of 2020.

However, the Australian dollar had a reason to rally, due to news out of China is that the country’s centralised iron ore purchasing. As the state-sponsored China Mineral Resources Group (CMRG), is about to begin buying operations.

The group will consolidate purchases of raw iron ore material under a single state-owned buyer. This will no doubt impact the iron ore trade price, most likely with prices lower than they otherwise would be. Australia is the number one exporter of iron ore.

In political news, the US weekend government shutdown was averted. The Senate to fund the government through December 23. The House already approved the bill. It heads now to US President Biden for signing.

Speakers from the Federal Reserve will hit the circuit again today. Fed members Daly, Williams and Mester are all on the docket.