Economic News 20171024

EXPLENATION OF THE ECONOMIC NEWS

 

  1. The German Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

 

  1. The German Services Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the services sector. The report is based on surveys of over 300 business executives in private sector services companies. Data is usually released on the third working day of each month.Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Replies from larger companies have a greater impact on the final index numbers than those from small companies. Results are presented by question asked, showing the percentage of respondents reporting an improvement, deterioration or no change since the previous month. From these percentages, an index is derived: a level of 50.0 signals no change since the previous month, above 50.0 signals an increase (or improvement), below 50.0 a decrease (or contraction).Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A higher than expected reading should be taken as positive/bullish for the EUR , while a lower than expected reading should be taken as negative/bearish for the EUR.

 

  1. The Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

 

  1. The PMI monthly Composite Reports on Manufacturing and Services are based on surveys of over 300 business executives in private sector manufacturing companies and also 300 private sector services companies. Data is usually released on the third working day of each month. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Replies from larger companies have a greater impact on the final index numbers than those from small companies. Results are presented by question asked, showing the percentage of respondents reporting an improvement, deterioration or no change since the previous month. From these percentages, an index is derived: a level of 50.0 signals no change since the previous month, above 50.0 signals an increase (or improvement), below 50.0 a decrease (or contraction).

 

  1. The Euro-zone Services Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the services sector. The report is based on surveys of about 600 business executives in private sector services companies. Data is usually released on the third working day of each month. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Replies from larger companies have a greater impact on the final index numbers than those from small companies. Results are presented by question asked, showing the percentage of respondents reporting an improvement, deterioration or no change since the previous month .From these percentages, an index is derived: a level of 50.0 signals no change since the previous month, above 50.0 signals an increase (or improvement), below 50.0 a decrease (or contraction).Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A higher than expected reading should be taken as positive/bullish for the EUR , while a lower than expected reading should be taken as negative/bearish for the EUR.

 

  1. The Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A higher than expected reading should be taken as positive/bullish for the USD while a lower than expected reading should be taken as negative/bearish for the USD.

 

  1. The Service PMI release is published monthly by Markit Economics. The data are based on surveys of over 400 executives in private sector service companies. The surveys cover transport and communication, financial intermediaries, business and personal services, computing & IT, hotels and restaurants. An index level of 50 denotes no change since the previous month, while a level above 50 signals an improvement, and below 50 indicates a deterioration. A reading that is stronger than forecast is generally supportive (bullish) for the USD, while a weaker than forecast reading is generally negative (bearish) for the USD.

 

  1. The American Petroleum Institute reports inventory levels of US crude oil, gasoline and distillates stocks. The figure shows how much oil and product is available in storage.The indicator gives an overview of US petroleum demand. If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices. The same can be said if a decline in inventories is less than expected. If the increase in crude is less than expected, it implies greater demand and is bullish for crude prices. The same can be said if a decline in inventories is more than expected.

 

GEOPOLITICAL NEWS THAT COULD AFFECT THE MARKET

 

How the ECB could deliver a shock to markets

Traders are eagerly anticipating Thursday’s meeting of the European Central Bank (ECB),  with some contemplating whether President Mario Draghi’s actions could radically reschedule when the central bank’s first rate hike could come. Back in July, Draghi said that discussions regarding a change in monetary policy stance will begin in the fall. In September, he then indicated that the bulk of the decisions regarding the asset purchase program are likely to be made in October. With autumn leaves now lining the streets, markets are expecting the “fall” decision to come this Thursday.

Herein lies the challenge. What can the ECB do that will simultaneously:

Keep the doves happy (including Draghi himself who has said that considerable stimulus may still be needed to get inflation back up to 2 percent)

Placate the hawks who are getting nervous about too much accommodation backfiring

Keep peripheral yields pinned (especially given the Catalan backdrop and Italian elections next year)

Ensure that the market doesn’t materially bring forward the timing of the first rate hike which would then cause an unwarranted appreciation in the currency

Avoid running into any (self-imposed) technical constraints due to the limited supply of bonds left in the universe for the ECB to buy, particularly pronounced in Germany.