U.S. manufacturing PMI falls to 2-month low of 55.5 in March

U.S. manufacturing activity expanded at a slower rate than expected in March, fuelling concerns over the strength of the economy, preliminary data showed on Monday.

U.S. manufacturing PMI falls more than expected in March

In a report, market research group Markit said that its preliminary U.S. manufacturing purchasing managers’ index fell to a seasonally adjusted 55.5 this month from a final reading of 57.1 in February. Analysts had expected the index to dip to 56.5 in March.

On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.

Commenting on the report, Chris Williamson, Chief Economist at Markit said that “The survey is broadly consistent with manufacturing output rising at an annualized rate of approximately 4% in the first quarter and job creation in the sector running at around 10-15,000 per month.”

Following the release of the data, the U.S. dollar held on to gains against the euro, with EUR/USD shedding 0.09% to trade at 1.3782.

Meanwhile, U.S. stock markets were mixed after the open. The Dow Jones Composite rose 0.2%, the S&P 500 was flat, while the Nasdaq 100shed 0.5%.

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U.S. stocks open mixed ahead of PMI report; Dow Jones up 0.34%

U.S. stocks opened mixed on Monday, as investors awaited the release of upcoming U.S. manufacturing activity data, although a disappointing Chinese report published earlier in the day weighed.

U.S. stocks mixed as markets eye data

During early U.S. trade, the Dow Jones US rose 0.34%, the S&P 500 added 0.17%, while theNasdaq fell 0.15%.

The preliminary reading of China’s HSBC manufacturing purchasing managers' index fell to an eight-month low of 48.1 in March from a final reading of 48.5 in February. Analysts had expected the index to tick up to 48.7.

Markets were also jittery after Federal Reserve Chair Janet Yellen suggested last week that a rate hike might come about six months after the bank’s stimulus program ends, which is expected to happen in the fall.

Coca-Cola (NYSE:CCE) shares rose 0.16% after activist investor David Winters sent a public letter to the company, criticizing its compensation plans.

Adding to gains, Herbalife (NYSE:HLF) surged 6.92% after the health care giant said it agreed to nominate three people proposed by billionaire Carl Icahn to its board. The news sent Herbalife shares up 6.60% in pre-market trade.

In the financial sector, JP Morgan Chase (NYSE:JPM) climbed 0.85% amid reports Fang Fang, the U.S. lender's chief executive officer of investment banking for China, is leaving after more than 12 years at the firm.

Other stocks likely to be in focus included Sonic Corp (NASDAQ:SONC), scheduled to report quarterly earnings later in the day.

Across the Atlantic, European stock markets were mixed to lower. TheDJ Euro Stoxx 50 declined 0.44%, France’s CAC 40 slipped 0.29%, Germany's DAX shed 0.29%, while Britain's FTSE 100 inched up 0.03%.

During the Asian trading session, Hong Kong's Hang Seng surged 1.91%, while Japan’s Nikkei 225 rallied 1.77%.

Later in the day, the U.S. was to release preliminary data on manufacturing activity.

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Forex - U.S. dollar dips against Canadian dollar

The U.S. dollar edged lower against the Canadian dollar on Monday as investors shrugged off lackluster data from China, while prospects for a U.S. interest rate hike as soon as early next year continued to underpin the greenback.

U.S. dollar edges lower against Canadian dollar

USD/CAD touched lows of 1.1209 and was last down 0.07% to 1.1213, not far from last Thursday’s four-and-a-half year highs of 1.1277.

The pair was likely to find support at 1.1173, Friday’s low and resistance at 1.1277.

The greenback continued to remain supported after markets brought forward expectations for a U.S. rate increase after Fed Chair Janet Yellen suggested last week that borrowing costs might start to rise about six months after the bank’s stimulus program ends, which is expected to happen in the fall.

Investors shrugged off a report showing that Chinese manufacturing activity deteriorated again in March.

The preliminary reading of China’s HSBC manufacturing purchasing managers' index fell to an eight-month low of 48.1 in March from a final reading of 48.5 in February. Analysts had expected the index to tick up to 48.7.

The loonie, as the Canadian dollar is also known, received lingering support after stronger-than-forecast data on inflation and retail sales on Friday eased pressure on the Bank of Canada to cut rates.

Statistics Canada reported that consumer prices rose 0.8% in February, up from 0.3% in January. Analysts had forecast a 0.6% rise.

On a year-over-year basis, inflation slowed to 1.1%, from 1.5% in January.

Earlier in the week, BoC Governor Stephen Poloz had warned that the bank could have to cut rates if inflation remains low.

Elsewhere, the euro was lower against the loonie, with EUR/CAD down 0.23% to 1.5446.

The euro slipped after data released on Monday showed that German private sector activity slowed in March. The data overshadowed another report showing a return to growth in the bloc’s second largest economy, France.

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U.S. futures edge higher but caution remains; Dow Jones up 0.19%

U.S. stock futures pointed to a higher open on Monday, although investors remained cautious after a disappointing economic report out of China, while markets eyed the release of U.S. manufacturing data later in the day.

U.S. futures point to higher open despite cautious trade

Ahead of the open, the Dow Jones US futures pointed to a 0.19% rise, S&P 500 futures signaled a 0.25% gain, while the Nasdaq 100 futures indicated a 0.35% increase.

The preliminary reading of China’s HSBC manufacturing purchasing managers' index fell to an eight-month low of 48.1 in March from a final reading of 48.5 in February. Analysts had expected the index to tick up to 48.7.
Markets were also jittery after Federal Reserve Chair Janet Yellen suggested last week that a rate hike might come about six months after the bank’s stimulus program ends, which is expected to happen in the fall.
Coca-Cola (NYSE:CCE) was likely to be in focus, after activist investor David Winters sent a public letter to the company, criticizing its compensation plans.

Health care giant Herbalife (NYSE:HLF) was also expected to be active, after saying it agreed to nominate three people proposed by billionaire Carl Icahn to its board. The news sent Herbalife shares up 6.60% in pre-market trade.

In the financial sector, JP Morgan Chase (NYSE:JPM) was set to move amid reports Fang Fang, the U.S. lender's chief executive officer of investment banking for China, is leaving after more than 12 years at the firm.

Other stocks likely to be in focus included Sonic Corp (NASDAQ:SONC), scheduled to report quarterly earnings later in the day.

Across the Atlantic, European stock markets were lower. The DJ Euro Stoxx 50 declined 0.80%, France’s CAC 40 dropped 0.59%, Germany's DAX slid 0.57%, while Britain's FTSE 100 shed 0.37%.
During the Asian trading session, Hong Kong's Hang Seng surged 1.91%, while Japan’s Nikkei 225 rallied 1.77%.

Later in the day, the U.S. was to release preliminary data on manufacturing activity.

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Euro zone private sector recovery remains solid

The pace of the recovery in the euro zone’s private sector slowed slightly in March but remained close to the previous month’s two-and-a-half year highs, according to data released on Monday, while a return to growth in France indicated that the recovery in the region is broadening.

Euro zone business activity remains solid in March

The preliminary reading of the euro area’s composite purchasing manager’s index ticked down to a two-month low of 53.2 in March, only slightly lower than February’s 32-month highs of 53.3.

The euro zone’s manufacturing PMI edged down to 53.0 from 53.2 in February, in line with expectations.

The region’s services PMI came in at 52.4, down slightly from 52.6 in February, compared to expectations for an unchanged reading.

The report said growth in new orders accelerated at the fastest pace since May 2011 in March. Employment also rose slightly, increasing for a second month, providing the first signs of job creation since the end of 2011.

“The ongoing upturn in business activity in March rounds of the euro zone’s best quarter since the second quarter of 2011. The survey is signaling a 0.5% increase in GDP in the first quarter, building on the 0.3% increase seen in the final quarter of last year,” said Chris Williamson, chief economist at survey compiler Markit.

Germany’s manufacturing PMI fell to a four-month low of 53.8 this month, from a final reading of 54.8 in February and below forecasts of 54.6. The country’s services PMI declined to 54.0, from 55.9 last month.

The French manufacturing PMI rose to 51.9 in March, from 49.7 last month, ahead of expectations for an uptick to 49.8. France’s services PMI rose to a 26-month high of 51.4 from 47.2 in February, well above forecasts for a reading of 47.5.

The report noted that manufacturers and service providers cut prices again in March, adding to concerns over the risk of deflation in the euro area. The composite output price index fell to an eight-month low of 48.5 from 49.3 last month.

“There remains an argument for further stimulus, especially if the rate of growth of activity cools again in April,” Chris Williamson said.

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