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January 24, 2019 By Peter Boockvar

More softer data overseas

Ahead of the release of the US Markit manufacturing and services PMI indices today, we saw a few overseas figures that don’t look good. Japan’s January manufacturing PMI fell to exactly the flat line at 50 from 52.6 in November. That’s the lowest since August 2016 and Markit said “The underlying picture will raise concern given renewed reductions were seen in new orders and output. Further signs that the downturn in the global trade cycle could yet worsen were also signalled, with new export orders falling at the sharpest rate since July 2016.” While weak, markets didn’t respond much as the yen was slightly lower, JGB yields were little changed as was the Nikkei. That said, the number does reinforce the slowdown of global economic activity.

JAPAN MANUFACTURING PMI

In Australia, and with their close economic relationship with China, their manufacturing and services composite index fell to 51.5 in January from 52.9. That is the lowest print in this 33 month survey history and was driven by weakness in services as manufacturing rose. Markit though said “Despite concerns about trade war risks, export orders are holding up. And lower fuel prices are now having a restraining influence on business input costs.” On the headline weakness, the Aussie $ is falling to a 3 week low vs the dollar.

The Eurozone manufacturing and services January PMI fell to 50.7 from 51.1 with both components falling m/o/m. The estimate was 51.4 and that is the slowest pace of growth in 5 1/2 years. According to Markit, this level of activity equates to GDP growth of just .1% q/o/q. “Stall speed” in other words. They further said “ongoing auto sector weakness, Brexit worries, trade wars and the protests in France were again widely cited as factors dampening growth, but the survey responses indicate that a deeper malaise has set in at the start of the year. Companies are concerned about a wider economic slowdown gathering momentum, with rising political and economic uncertainty increasingly affecting risk appetite and demand.” The euro is weaker in response and European bond yields are lower across the board. Stocks though are bouncing.

Again, looking at US corporate earnings releases to glean insight in light of the lack of economic data points, Texas Instruments whose chips go not only into tech products but also auto’s and other industrial areas and thus is a good proxy said on the conference call “Clearly we’re seeing some weakness in the market. That’s primarily the semiconductor cycle, although the macro environment, specifically the trade tensions, appear to be having an impact and could affect the depth and duration of this downturn.” The stock though is up today as some were expecting worse.

After raising interest rates in November, the Bank of Korea held steady at 1.75% in obvious response to the growth worries. As to a cut though they said “But our current stance is already accommodative, so the BoK doesn’t think now is the time to discuss a rate cut.” The Kospi was up by .8%.

Have that BoK comment sink in for a moment when looking at the situation in many other areas where rates are already also so low. In other words, don’t rely on central banks to save us next time. On this note, we hear from Mario Draghi at 8:30 am est today as the ECB meets. Because a slowing Europe confirms his policy failure, he’ll do his best to put a positive spin on the economic situation, notwithstanding the data. He’ll likely emphasize the tightening labor market and rising wages and do his best to deflect weakness elsewhere that will eventually impact the labor market and wages.

Lastly, yesterday we saw more bullishness and less bearishness in the weekly II data. Today, the individual investor index, the AAII, was a bit more bullish. Bulls rose 4.1 pts to 37.7 after falling by 4.9 pts last week. That’s just off the highest since early November. Bears fell 3.9 pts to 32.3 after rising by 6.9 pts in the week prior. that’s just off the lowest since early December. The December puke right after in stocks saw bears get as high as 50 by December 27th.

Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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