UK and US maintain strong manufacturing growth as France stumbles

US factory output grows at fastest rate since January 2013. Markets cautious after the release of China, France and Germany’s PMI reports. UK factory output growth near to three-year high. France’s manufacturers struggle in December…


Powered by article titled “UK and US maintain strong manufacturing growth as France stumbles – business live” was written by Graeme Wearden, for on Thursday 2nd January 2014 15.17 UTC

ISM’s PMI survey released

Confirmation that America’s factory sector posted decent growth in December, from the US Institute of Supply Management.

The ISM’s index of purchasing managers from across the US came in at 57.0 — slightly down on November’s 57.3, but some distance above the 50-point mark that divides expansion from contraction.

That suggests the US factory sector finished the year pretty strongly.

The report (which is distinct from Markit’s own PMI survey), showed the new orders grew at the fastest pace since April 2010, while the manufacturing employment index was the highest since June 2011.


Encouraging news, but not enough to change the mood on Wall Street where the Dow Jones is still down around 0.5%.


Twenty minutes into the trading year, and the Dow Jones industrial average has dropped 75 points, or 0.45%, to 16500.

US stock market opens

Wall Street has just opened for the first time this year, and shares are dropping a little.




In the European markets, the main indices are also in the red – led by France after its poor factory data:

• FTSE 100: down 11 points at 6737, – 0.18%

• German DAX: down 61 points at 9490, – 0.6%

• French CAC: down 42 points at 4253, -1%

Last month’s jump rise in US factory activity will encourage America’s central bank to keep winding back its stimulus programme.

So argues Chris Williamson, Chief Economist at Markit, anyway:

“The upturn in the PMI in December rounds off one of the strongest quarters for manufacturing since the economy pulled out of recession. The goods producing sector is therefore on course to provide a firm boost to the economy in the fourth quarter, which we expect to see growing at an annualised pace of at least 3%.

“Most encouraging is the fact that growth is being led by rising demand for investment goods such as plant and machinery. This tells us that business spending is picking up on the back of rising confidence, which adds to the sense that the recovery is being more self-sustaining.

“This improvement in confidence is translating into increased hiring, with the PMI Employment Index running at a level consistent with around 20,000 jobs being added in manufacturing each month.

“The buoyancy of these survey data supports the view that the Fed will continue to taper its asset purchases at its January meeting.”

Graph: US manufacturing growth at 11-month high

US manufacturing PMI at 11-month high

Growth in America’s manufacturing sector has hit an eleven-month high, according to Markit’s latest survey.

The data, just released, shows Market’s US PMI jumped to 55.0 in December, up from 54.7 in November.

That’s the highest reading since January 2013, and suggests the US economy ended last year in pretty good health.

Here’s Markit’s key points:

  •  PMI rises to 11-month high, indicating solid improvement in business conditions
  •  Output supported by strong increase in new orders (the output index hit a 21 month high of 57.5, from 57.4)
  •  Employment growth quickens to nine-month high
  •  Input price pressures intensifies 

More to follow….

The first US economic news of 2014 is in…. and the number of people filing new claims for unemployment benefit fell last week, for the second week running.

A total of 339,000 new initial jobless claims were filed in the seven days to 28 December, down from 341,000 the previous week.

The number of people filing ‘continued claims’ for jobless benefit also fell, by around 100,000 people to 2.833m.


The Athens stock market is outperforming the rest of Europe today, with the main index up around 4%.

Bank stocks are leading the way, after Greek manufacturing activity almost stopped shrinking in December.

(reminder, Greece’s manufacturing PMI hit a four-year high this morning, with thesub-index of factory output actually rising a little in December).

But while today’s data is encouraging, it doesn’t solve Greece’s wider problems — the damage caused by its long recession, the political instability, the public despair after years of austerity…

Nick Malkoutzis, Greek journalist, has blogged about the challenges facing Greece in 2014 here. Here’s a flavour:

When it comes to assessing the state of Greek society, it is true to say that there were some remarkable achievements in 2013 despite the adverse circumstances, such as the mobile app designers who are bringing in more revenues than olive oil exporters and the wine makers who are tapping into new markets.

However, exceptional accomplishments cannot disguise that reality for a growing number of Greeks is laced with doubt, disappointment and despair. The desire among local and European decision makers for a “success story” has made them blind to the fact that many Greeks are in torment and losing faith that the country will recover its economy and, most important of all, its dignity.

There are people in Greece and Europe that have come to accept that it’s okay for a developed country to have a jobless rate that’s nearing 30 percent. They accept, without much fuss, that Greece has lost a quarter of its gross domestic product in five years, and that its citizens have seen their disposable household income plummet by a third during the same period.

This blinkered approach means they do not see the other Greek narrative: The story of those who live with the daily effects of an economy in deep decline and a state that is struggling.

Greece in 2014: Where are we?

France’s ‘sickly economy’ is the biggest threat to growth in the eurozone this year, argues Stephen Lewis of Monument Securities.

Lewis writes (on the back of today’s poor factory data):

The most significant brake on global growth in 2014 is likely still to be the euro zone.

Much has been made of last year’s recovery in the zone’s economy but, still, forecasts for German GDP growth in 2014 are unexciting. The Bundesbank last month projected a rise of 1.7% while the German economic institutes’ forecasts are strung out between 1.8% and 2.0%. That, apparently, is what counts as a banner year nowadays.

Evidence has suggested the peripheral euro zone states at least stopped contracting in the course of 2013 but, for most series, reliable data is only available up to the third quarter. It remains to be seen whether these countries benefited primarily from strong summer tourist activity. The most serious threat to euro zone growth, as even the optimists acknowledge, is the sickly French economy.

The December PMIs for manufacturing, published today, illustrated the degree to which French economic performance is falling short even of the tepid growth elsewhere in the euro zone. France’s headline PMI index fell from 48.4 in November to 47.0, even as the euro zone measure rose from 51.6 to 52.7 and Germany’s index pushed higher from 52.7 to 54.3.

It seems the divergence between French and German economic fortunes will be one of the major factors influencing euro zone politics and investment in the year ahead. It will not help that the euro zone political leaders, under the cloak of establishing banking union, last month agreed a banking resolution mechanism that will, if anything, reinforce the ‘doom loop’ inextricably binding together banking and sovereign debt problems.

The WSJ has a nice piece explaining how Spanish and Italian bonds rose in value today, pushing down yields below the 4% level, as traders seek higher returns on their money:

Yes, yields are low, and the gap between yields on problem-child bonds and German debt is skinnier than it has been in a long time. But it’s still a gap. And if you assume that the euro-zone crisis is unlikely to rear up again, and that the European Central Bank still looks prepared to ease policy to help further, in contrast to the Fed, then it makes sense to jump in.

“We’re still in a low-rate environment and for many investors, Spanish and Italian bonds remain attractive as 10-year bonds in these countries still yield around 2 percentage points more than German Bunds,” said Lyn Graham-Taylor, interest rate strategist at Rabobank.

No Ugly Hangover for Spanish and Italian Bonds

Lunchtime summary

Britain’s manufacturing sector has begun 2014 on the front foot, after the latest survey of factory output showed solid growth last month.

On a busy morning for economic data, UK factories reported solid rise in output, job creation and exports.

The UK manufacturing PMI, which measures activity across the sector, fell slightly to 57.3 (from a three-year high of 58.1).

The figures suggest the UK should manage healthy growth in the next few months.

• Across the eurozone, manufacturing output rose at the fastest rate in 31 months. There was good news in Italy, where growth hit a 32-month high, and Spain, where November’s contraction was reversed.

But France’s growing reputation as the ailing man of Europe was reinforced, with its manufacturing PMI hitting a seven-month low of 47.0 - showing a significant drop in activity. There was no sign of a turnaround in the eurozone’s second-biggest economy.

Markit’s Chris Williamson commented:

France is seeing a steepening downturn, in part the result of widening export losses.

This suggests that competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers.”

Most European stock markets have fallen in the first few hours of new year trading. They were hit by disappointing manufacturing data from China and India – which hit the newswires before European traders had reached their desks after the new year break.

Both countries saw their PMIs falling closer to the 50-point mark that splits expansion from contraction (China’s fell to 50.5, from 50.8; India’s to 50.7 from 51.3).

Elsewhere in Europe…

Fiat’s shares surged after it agreed a deal to take full control of Chrysler. Analysts, though, have fretted about the amount of extra debt it will take on.

• And Latvians have been getting to grips with the euro, having joined the single currency at the start of the year. Here’s some photos.

• In the UK, Debenham’s chief financial officer has quit after the retailer announced a profit warning.


Brazil’s factory sector returned to growth last month, according to the latest survey of its manufacturing sector.

Markit reported that Brazil’s manufacturing PMI rose to 50.5 in December from 49.7 in November – showing ‘marginal improvement’ in its economy.

Firms reported stronger production growth and a rise in new work, while input and output price inflation cooled.

Markit’s chief economist, Chris Williamson, tweets:

Fiat’s agreement to take full control of Chrysler Group looks like the most interesting European business story of the day.

As flagged up earlier, the Italian carmaker has cheered investors with the deal, which reduces its dependence on European consumers . However, analysts are worried that Fiat is taking on even more debt.

Here’s Reuters full take

Fiat shares jumped on Thursday after it struck a $4.35 billion deal to gain full control of Chrysler Group LLC, but doubts remained over whether the Italian carmaker can use the merger to cut losses in Europe.

Investors welcomed the deal struck by Chief Executive Sergio Marchionne under which Fiat will buy the 41.46 percent of the No. 3 U.S. automaker it does not already own, without raising funds from the stock market.

Marchionne, who has run both companies since Chrysler’s 2009 U.S. government-funded bankruptcy restructuring, aims to merge the two into the world’s seventh-largest auto group.However, analysts worried about how the deal will increase Fiat’s already heavy debt burden, despite a relatively low price negotiated by Marchionne after more than a year of talks.

Fiat shares rose as much as 16% to levels last seen in August 2011 after the agreement, announced late on Wednesday, which aims to combine the two automakers’ resources and rejuvenate Fiat’s product lineup.

A Milan-based trader said:

“They paid less than the market had expected and there will be no capital increase to fund this, so no wonder the stock is flying.

“While it’s still to be seen how this will bode for Fiat’s future, this is a good start to the year for a company that has had quite a tough ride recently, especially in Europe.”

Fiat will buy the stake in the profitable U.S. group from a retiree healthcare trust affiliated to the United Auto Workers union. The trust will receive $3.65 billion in cash for the stake, $1.9 billion of which will come from Chrysler and $1.75 billion from Fiat.

After the deal closes, Chrysler has committed to giving the UAW trust another $700 million over three years.

However, Citigroup analysts said Fiat’s debt would become the highest for any European motor manufacturer.

“Group net debt will rise to around 10 billion euros ($13.8 billion) upon completion of this transaction … leaving it the most indebted OEM (original equipment manufacturer) in Europe,” they said in a note. “We continue to have concerns about the sustainability of this heavy debt burden.”

Photos: Latvia joining the euro

The eurozone now has 18 members, after Latvia joined the single currency at midnight yesterday.

Here’s a few photos, for the record.

In the bond markets, Spanish and Italian debt has strengthened in value. This has pushed down the yield, or interest rate, on both country’s bonds.

Italian 10-year debt is now changing hands at yields below 4% for the first time in eight months.

Market update

Back in the financial markets, this morning’s disappointing factory data from China (see opening post) has sent most European stock markets into retreat.

The news that French manufacturing output has fallen at the fastest rate in seven months (see here) has also hit sentiment — particularly in Paris, where the CAC has dropped almost 1%.

In London the FTSE 100 is down 32 points, or almost 0.5%.

And the German DAX didn’t cling onto its latest record high for long – it’s also down around 0.5%.

Brenda Kelly, chief market strategist at IG, says it’s not a great start to the year:

Factory activity growth in China has blighted sentiment….. Both the official Chinese PMI number and the HSBC metric showed a slowing in the country’s manufacturing sector in December.
Over in Europe, PMI manufacturing readings continue to show a general improvement, with Spain and Italy both exceeding analyst expectations. France is starting to become a concern: factory output there posted a seven-month low, which tends to indicate that any recovery in 2014 will be weak-to-moderate at best.
The attraction of mining stocks seen over the past couple of weeks has worn off. Anglo American, Vedanta Resources and BHP Billiton have all registered losses amid fears that 2014 will bring weakening demand for basic materials. The UK’s manufacturing output missed expectations slightly but has still succeeded in printing its ninth consecutive month of expansion.

Lee Hopley, Chief Economist at EEF, the manufacturers’ organisation, is also confident that Britain’s factories can expand this year — as long as firms invest for the long term.

She explains:

Manufacturers ended the year on a strong note and rising production, new orders and increased employment in December provided a springboard for growth going into 2014.

Surer signs of a manufacturing recovery in Europe together with steady growth both at home, in the US and emerging markets should align to support solid expansion of UK manufacturing in the year ahead.

However, while we can hope to see more of the ground lost during the recession made up this year, we must also start to see new investments coming on stream if the sector is to secure a sustainable, long-term recovery.

ING: UK could grow by almost 3% this year

And here’s James Knightley of ING on the UK factory data (see 9.42am):

The UK manufacturing purchasing managers’ index for December has fallen to 57.3 from a downwardly revised 58.1 figure for November. This is a slight disappointment given the consensus reading was 58.4, but remains consistent with very strong growth rates. New orders dipped to 60.4 from a 19 year high of 63.9, but again still suggests that the economy will expand robustly in early 2014.

Indeed, we are of the view that the UK can grow by close to 3% this year and with unemployment falling more swiftly than the Bank of England was predicting and tomorrow’s bank lending data set to show an acceleration in credit growth, the probability of an interest rate rise before year-end is growing.

Nonetheless for now we still predict the first rate rise won’t happen until early 2015, but this will depend on the implementation of macro prudential tools to try and cool particularly “hot” parts of the economy.

Jeremy Cook, chief economist of World First, says there’s still “a lot to be happy with” in the latest survey of UK manufacturing.

December’s number was still the 2nd strongest since February 2011 with the production and new orders components hitting fresh record highs.

Jobs growth remained strong on the back of stronger demand from both domestic and export markets and should continue the belief that the UK’s employment picture should improve over the course of 2014. Some concern may be raised from the increase in input prices that came as a result of supply difficulties and the likely cessation of downward pressure on energy prices.

All in all, this report confirms what we knew for a long time; the UK economy has entered at 2014 at a very decent clip.

UK factory output growth slows, but still strong

Britain’s manufacturing sector didn’t perform quite as well as expected last month, but has still posted healthy growth, according to Markit’s latest survey of the sector.

The UK manufacturing PMI, based on interviews with firms across the sector, slipped back to 57.3 in December, from a three-year high of 58.1 in November.

The City had pencilled in a reading of 58.0. Still, it’s a stronger reading than the eurozone (details here) and much, much better than France.

Manufacturing output rose for the ninth month in a row….

…as did exports, but the rate of export growth eased to the weakest since September. UK manufacturers reported improved demand from Brazil, China, Ireland, Russia and the USA.

Markit said Britain’s manufacturing sector ended 2013 on a positive footing.

December saw rates of expansion in production and new orders both remain among the highest in the 22-year survey history, leading to a pace of job creation close to November’s two- and-a-half year record.

Companies benefited from strengthening domestic market conditions and a solid bounce in incoming new export orders.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said the data was encouraging, declaring that:

UK manufacturing ended 2013 on a high and with all signs of powering ahead into 2014.


Howard Archer of IHS Global Insight says today’s data suggests the eurozone grew modestly in the final quarter of 2013:

December’s improvement in Eurozone manufacturing activity reported by the purchasing managers is welcome and it supports hopes that the Eurozone regained modest upward momentum in the fourth quarter of 2013 after GDP growth slowed to just 0.1% quarter-on-quarter in the third quarter of 2013.

We expect Eurozone GDP growth to have improved modestly to 0.2-0.3% quarter-on-quarter in the fourth quarter.

Archer also agrees that the falling French factory output “fuels concerns over the underlying health of the French economy”

And this graph shows how France’s manufacturing sector (in grey) has deteriorated while most peers have improved (you can see a larger version here).

Eurozone manufacturing output growth at 31-month high, despite French woes….

It’s official – the eurozone’s factory sector grew at the fastest pace in 31 months, suggesting that the region’s manufacturing sector is strengthening..

Data firm Markit reports that the final eurozone manufacturing PMI rose to 52.7, which indicates a pick-up in growth — it’s a improvement on November’s 51.6.

The industrial powerhouse of Germany the way, and there were very encouraging signs in Italy (where growth hit a 32-month high) and Spain (where output returned to growth)

France’s weak performance, though, is a real worry — it’s PMI reading of just 47 suggests a nasty stumble in December (although other surveys of the French economy have been more positive…).

Here’s Markit’s key points:

  •  Final Eurozone Manufacturing PMI at 52.7 in December (31-month high)
  •  Rising output and fuller order books encourage manufacturers to hold off from further job cuts
  •  New export orders continue to rise at solid pace 

This chart shows how France clearly under-performed at the back end of 2013:

Chris Williamson, chief economist at Markit said France is suffering a “steepening downturn”.

“A strengthening upturn in the manufacturing sector is helping the euro area recovery become firmly established. The latest numbers are consistent with production growing at a quarterly rate of approximately 1% at the end of the year. It’s also encouraging to see prices rising slightly, suggesting firms are seeing some improvement in pricing power.

“With producers reporting further growth of new orders, exports and backlogs of work, the stage is set for a good start to 2014, during which it seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy.

“France, however, remains a concern. While Germany, Italy and Spain are seeing the strongest output growth since early-2011, buoyed to varying degrees by improved export sales, France is seeing a steepening downturn, in part the result of widening export losses.

This suggests that competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers.”


And there may be a glimmer of light in Greece.

The Greek manufacturing PMI has hit its highest level in four years, up to 49.6 in December from 49.2 in November.

That still shows a small contraction, but might indicate the recession is finally bottoming out. New orders rose, but employment kept falling.

German factory output keeps rising

Much better news, as expected, from Germany — where manufacturing output grew at a faster pace in December.

That only underlines how badly France is doing….

French factories suffering

But there’s dire news for France — its factory downturn has intensified with the worst monthly manufacturing report since May 2013.

The French manufacturing PMI dropped to just 47 for December, a seven-month low, and well below the 50-point level that splits expansion from contraction.

That shows a sharper downturn in the manufacturing sector of Europe’s second-largest economy.

Market warned that output, new orders, employment and stocks of purchases all decreased at sharper rates in December.

New orders declined for the third month in a row, with exports dropping at the fastest rate since June.

Jack Kennedy, Senior Economist at Markit warned there was no sign of a turnaround yet.

Anecdotal evidence suggested that lingering uncertainties continue to hold back the spending and investment that are necessary to support a recovery in the sector.

Instead, most key variables in the latest PMI survey showed deteriorating trends to suggest that no such turnaround is in sight.”

Here’s some instant reaction to the news that Italy’s factory output grew at the fastest rate in 32 months.

Italian manufacturing output growth at 32-month high

Italy’s manufacturing output has risen at the fastest rate in 32 months — suggesting welcome signs of recovery in the Italian economy.

Markit just reported that the Italian PMI jumped to 53.3 for December, from 51.4 in November, which shows a rise in growth.

It was driven by an increase in new orders — and, crucially, a rise in employment.

Here’s the key points:

  •  Faster increases in output and new orders
  •  Job creation continues
  •  Sharpest rise in purchase prices since March 2012 

Phil Smith, economist at Markit, said Italy’s manufacturing sector goes from strength to strength, with its best growth in more than two-and-a-half years in December.

There were numerous positives to be taken from the latest data, not least further job creation. And with backlogs accumulating at an almost unprecedented rate for the survey, this looks set to continue.

“As is expected during an upturn, input price inflation has begun to accelerate as higher demand for materials gives suppliers greater pricing power. It’s running slightly faster than the average recorded over the series history, but remains well below the highs observed in the rebound following the 2008/9 global financial crisis.”

It comes hot on the heels of decent data from Spain this morning – and may suggest conditions improving in the eurozone’s weaker nations


Fiat’s shares are <ahem> motoring this morning – jumping 14% after agreeing to pay $3.65bn to buy the 41.5% of Chrysler it does not already own.

The deal gives Fiat more opportunity to profit from the US car sector, and making it less reliant on Europe.

Spanish manufacturing returns to growth

This should cheer the Madrid government – Spanish manufacturers reported a welcome, and much-needed return to growth in December. That reverses a worrying dip in the previous month.

However — firms are still laying off staff.

The Spanish manufacturing PMI hit 50.8, jumping from November’s 48.6 — over the 50-point mark that indicates whether the sector grew or shrank.

The employment PMI rose to 48.8, from 45.1 (showing that workforce’s still shrank, but at a slower rate).

Andrew Harker, a senior economist at Markit, commented:

The return to growth of the Spanish manufacturing sector at the end of 2013 was a positive sign, largely as it allayed fears that the decline seen in November heralded the start of a new downturn.

Rises in output and new orders lay a platform that firms will hope to build on during the new year should tentative improvements in client demand strengthen.


German DAX hits new record high

The German index of leading shares has hit yet another record high as Europe’s stock markets open for 2014.

The DAX jumped 0.5% at the start of trading, showing no loss of confidence in Frankfurt after a bumper 2013.

This sent the FTSEurofirst300 index, which tracks major shares in the region, up 0.3% to a five and a half-year high.

But it’s a more cautious start in London, as news of slowing factory growth in China (see opening post) weights on the City.

The FTSE 100 is down 15 points at 6733, partly pushed down by mining companies (Anglo American has lost 1.2%). And the French CAC is up just 0.3%.

Mike van Dulken, head of research at Accendo Markets, says that “positive New Year sentiment” is being held back by fears that China will struggle to deliver strong economic growth while also implementing reforms.

Germany’s DAX had hit a series of new record highs last year – no wonder brokers were knocking back the fizz on Monday, the final German trading day of the year.

(worth noting, though, that the DAX also includes dividends, so it’s actually worth less than in 2000 – see the FT for more)

Dutch manufacturing output growth at 32-month high

More economic data flooding in, including upbeat news from the Netherlands.

The Dutch manufacturing PMI has risen to a 32-month high of 57.0 for last month, from 56.8 in November.

That’s a strong performance in December, showing that factory growth accelerated. Markit, which compiled the data, said Dutch factories reported growth in new orders and rising confidence.

The Polish manufacturing PMI has dropped for the first time in eight months, to 53.2 from 54.4 — but that still indicates the sector expanded.


12 months pay for Debs’s departing CFO

Debenham’s chief financial officer will still receive 12 month’s pay and benefits after resigning today following Tuesday’s profit warning (unless he gets another job).

From the statement:

Simon Herrick’s current service agreement has a notice period of 12 months. He receives an annual salary of £410,000, a flexible benefits payment of £18,375 per annum and an annual pension contribution of £61,500; a total of £489,875 per annum.

He is also provided with life assurance cover. He will continue to receive these amounts and benefits in 12 monthly instalments commencing 2 January 2014.

However, should he receive any payments as a result of alternative employment or provision of services during this period, other than in respect of one non-executive position, subsequent instalments would be reduced by the amount of such payments.


Elsewhere in British retail, House of Fraser is celebrating its “best Christmas trading ever”.

Like-for-like sales in the three weeks to Christmas jumped by 7.3%.

Sounds good, but we’ll be looking to see whether it cut profit margins to keep stock moving…..

Debenhams finance director quits

In the UK, the chief finance officer of Debenhams has fallen on his sword, just two days after the retail chain disappointed investors with a New Year’s Eve profits warning.

Simon Herrick is stepping down with immediate effect, the company announced this morning. He’s been under pressure after it emerged that Debenhams has asked its suppliers for discounts earlier this month.

On Tuesday, Debenhams admitted that Christmas trading had not met expectations (covered in detail in Tuesday’s liveblog). The news sent its shares tumbling by 12, and added to concerns that other retailers may have struggled…..


Growth in Sweden’s factory output fell back last month — with the PMI dropping to 52.2 from 56.0 in November. That still shows growth, but it’s quite a slowdown.

Irish factory output jumps

Better news from Ireland — its factory output has grown for the seventh month in a row, and picked up pace in December. That’s encouraging, as it leaves its bailout behind.

Markit’s Irish manufacturing PMI rose to 53.5, from 52.4 – the second highest reading of output in 18 months.

Coming up: the final reading for France’s manufacturing sector at 8.50am GMT. That could be the one to watch – the ‘flash’ estimate of 47.1 two weeks ago was pretty poor, suggesting the French economy could be sliding into recession.

The overall eurozone reading comes at 9am, with the UK at 9.30am.


China weighs on the markets

Patrick Latchford at Monex Capital Markets agrees that the Chinese data has weighed on markets:

The majority of equity markets across Asia have been under pressure with the start of 2014′s trade being defined by that worse than expected manufacturing PMI reading from China.

Critically the number remains above 50 which means the sector is still expanding but the slowing pace of growth does underline just how the market is now maturing.

Indian factory growth falls back

It’s not just China. India’s factories also lost momentum last month, with firms cutting production as domestic demand fell.

Reuters has more details:

The HSBC Manufacturing Purchasing Managers’ Index compiled by Markit, fell to 50.7 in December from 51.3 in the previous month.

The index, which gauges business activity in Indian factories but not its utilities, spent three months below the 50 mark that separates growth from contraction before rising above it in November.

“Manufacturing activity decelerated slightly in December as a slowdown in domestic order flows led to slower output growth,” said Leif Eskesen, a chief economist at HSBC.

“Today’s numbers show that growth remains moderate and struggles to take off due to lingering structural constraints.”

Happy New Year!

Good morning, and welcome to our rolling coverage of events across the financial markets, the world economy, the eurozone, and the business world.

And a very happy new year to you all too.

There’s a back to school feel about this morning, with a splurge of economic data from across the globe. It’s the day when Markit publishes its surveys of manufacturing output — and we’ve already had confirmation that China’s factory growth slowed in December.

Growth in new orders also fell, while foreign sales contracted slightly for the first time in four months and staffing levels fell for the second month in a row.

This pushed the headline Chinese PMI down to 50.5 in December, from 50.8 in November — close to the 50-point mark that separates expansion from contraction.

It all suggests that China’s huge manufacturing sector finished 2013 on a lull (as the ‘flash’ data two weeks ago suggested too).

Société Générale economist Wei Yao said Beijing’s efforts to tighten credit was hampering factory output — a trend that could continue this year.

“Overall, the report suggests weakening growth momentum of China’s manufacturing sector, as we have anticipated

We expect the impact of tight liquidity conditions to become more pronounced entering [the first half of] 2014.”

This was enough to send the main Chinese stock indices down around 0.35%, with the Hong Kong index dipping too.

The big fall came in South Korea, where the index has slumped by 2.5% after some weak car sales figures (and despite a glitzy ceremony to mark the start of trading in Seoul):

Lots more data to come — including PMIs for most European countries.

I’ll track the key points, and other developments through the day…..

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