Daily Forex Focus – 2 February
Global stocks this morning are mostly higher with the EuroStoxx 50 up +1.24% (FTSE-100- +1.51% at 5,766: DAX +2.12% at 6,593; CAC-40 +1.78% at 3,353: IBEX +1.68% at 8,466). USD and USTs are lower as stocks and commodities rose, with gold at a 7-week high at $1,749.40/oz after Chinese PMI manufacturing activity unexpectedly expanded last month, which improves the outlook for global economic growth. EUR/USD rose ($1.3184) after the Jan German manufacturing PMI was unexpectedly revised up +0.1 to 51.0, a 6-month high, while Spanish, Italian and Portuguese government bonds rallied after Greece offered a ‘sweetener’ to win a debt-swap deal with bondholders.
People with knowledge of the debt talks said creditors negotiating with Greece may get a sweetener tied to a revival in economic growth that would ease the impact of accepting a lower interest rate on the new bonds. European stocks also received a boost after the Jan U.K. manufacturing PMI rose +2.4 to 52.1, stronger than expectations of +0.4 to 50.0 and the fastest pace of growth in 9 months.
Asian stocks today closed mostly higher with Japan up +0.08%, China -1.43%, Australia -0.87%, South Korea +0.06%, India +0.62%. Asian stocks advanced as expanding manufacturing activity in China and India eased concern that global economic growth was slowing. The Jan China manufacturing PMI unexpectedly rose +0.2 to 50.5, stronger-than-expectations of a -0.7 point decline to 49.6, while the Jan India HSBC/Markit Economics manufacturing PMI rose +3.3 to 57.5, an 8-month high.
Despite the unexpected expansion in Chinese manufacturing activity last month, the Shanghai Stock Index still closed lower as the rebound in manufacturing reduces the need for looser monetary policy. Another negative for Chinese stocks was the report from the Twenty-First Century Business Herald that Jan China new loans may be below CNY1.0 trillion ($158.6 billion), which signals slo0000wing loan growth as new loans in China have been above CNY1.0 trillion every Jan for the past 3 years. Gains in Japanese stocks were limited as exporters retreated as a rally in USD/JPY to a 3-month high undercuts exporters’ earnings prospects.
Wall Street: DJIA rose 3.4% in January and the S&P500 gained 4.4%, the best performances for both indices to open a year since 1997 when the S&P gained 6.1%. Bill Clinton was inaugurated for his second term, but an Asian financial crisis and “Titanic” lay ahead. Later that year, the Dow crossed 7,000 and 8,000 for the first time. DJIA was up 101.79 (+0.81%) at 12,734.70. The S&P500 rose 10.27 (+0.78%) at 1,322.68. The Nasdaq added 19.35 (+0.69%) at 2,833.19