Early Morning Call: APAC indices fall as China's service activity slows
The Hang Seng was by far the worst performer in APAC on Wednesday as traders digested the latest service activity data in China.
The Hang Seng
The Hang Seng was by far the worst performer in the Asia Pacific (APAC) region on Wednesday as traders digested the latest service activity data in China. The Caixin services purchasing managers' index (PMI) fell to 53.9 in June from 57.1 in May, the lowest reading since January. The data broadly tracked the government's official PMI released last week.
On Monday, the Caixin manufacturing PMI managed to keep its head above the water in June, falling to 50.5. This means that the composite PMI, which compiles manufacturing and services activity, is down to 52.5, making it a sixth straight month of expansion.
The market awaits a few macroeconomic indicators today at 10AM, the producer price index in the eurozone is expected to be down -13% in May year-on-year (YoY), and later in the afternoon, US factory orders are forecast to rise 0.8% in May month-over-month (MoM). The Federal Reserve (Fed) will release the minutes of its last meeting, at which it left the Federal Funds Rate on hold.
The pause in rates followed a run of consecutive rate hikes at every meeting since March 2022. The updated economic projections suggest rates may reach 5.6% by year's end, thus suggesting two more increases.
The Federal Reserve
Fed Chair Jerome Powell recently reinforced the view that the board is leaning towards two rate hikes and hasn't ruled out consecutive-meeting rate increases. The latest economic projections from the Fed indicate that the fed funds rate is expected to gradually fall to 4.6% in 2024. Furthermore, the minutes may reveal the board's intention to keep interest rates higher for an extended period, with a rate hike possibly delayed until the end of the first quarter or second quarter of 2024 if inflation falls towards the desired trajectory.
AO World said profit recovered in its 2022–23 year as it benefited from a plan to reduce costs and improve margins. The British online electricals group's financial year earnings before interest, taxes, depreciation, and amortization (FY EBITDA) reached 45 million pounds, in line with guidance and up from 23 million pounds in 2021–22. Revenue fell 17% to 1.14 billion pounds.
Oil prices remained range-bound after two of the world's largest oil producers said earlier this week, they would cut supplies further to support prices. Saudi Arabia's voluntary oil output cut of one million barrels per day will be extended for another month to include August, and Russia will cut oil exports by 500,000 barrels per day in August.
On the soft commodities market, soybeans rose over 5% last Friday, while corn prices have been falling. At the end of last week, the US Department of Agriculture announced that farmers in Illinois, Minnesota, and North Dakota had shifted from soybeans to corn. Analysts are now concerned that soybean supplies will be tight and expect the soybean and soybean oil markets to remain bullish.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 40
- The only provider to offer 24-hour pricing
Live prices on most popular markets