China slowdown hits sentiment
Financial markets were pressured across Asia yesterday after another disappointing result from the Chinese manufacturing sector.
Yesterday’s official manufacturing PMI (purchasing managers index) fell from 49.2 in April to 48.8 in May – well below the hoped-for increase to 49.4. The services index also eased, but remains at elevated levels.
The news hit markets across the region with Shanghai Composite down 0.6% and the Australian S&P/ASX200 down 1.6%. Commodities were steady, but oil plunged.
Today, the private sector Caixin manufacturing PMI is due, providing further detail on Chinese manufacturing.
Aussie inflation jumps, RBA back in focus
The Australian dollar was lower despite a higher-than-expected inflation report yesterday that saw annualised headline inflation climb from 6.3% in March to 6.8% in April.
The higher inflation report saw markets worry about another potential rate hike from the Reserve Bank of Australia when it meets on Tuesday.
RBA governor Philip Lowe spoke yesterday and said he remains worried about inflation – especially in the rental market – adding fuel to rate hike fears.
According to ASX pricing, the probability for an RBA rate hike has jumped from 3% on Monday to 22% on Wednesday (source: ASX, 1 June).
US debt ceiling, jobs, key over next 48 hours
The focus quickly turns back to the US today with the vote to debate and begin proceedings to increase the US debt ceiling due late Wednesday night (Washington DC time). This is during the morning of the Asian trading session.
With the vote still contentious, and much of the procedural work requiring Democrat politicians to provide support to Republican leader Kevin McCarthy’s bills, any slowdown in progress could alarm markets.
Otherwise, US jobs data is due in the next 48 hours as well, with ADP jobs due tonight, and the all-important non-farm employment report due on Friday night.
AUD, CNY hit hardest after China data
*Full FX rates data is unavailable today – our apologies.
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Calendar: 29 May – 2 June
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