As we continue to kickoff 2025, things are tough all over, plus a look at US dollar troubles.
US Dollar Troubles
March 3 (King World News) – Peter Boockvar: Keep an eye on the US dollar index as chart wise it’s looking like the right shoulder of a classic head and shoulders top.
The data focus today is on February global manufacturing with a slew of PMI’s being released ahead of the US ISM at 10am est. I’d call it all a very mixed bag.
Meanwhile In China
China’s state sector focused manufacturing PMI hovered around 50 at 50.2, up 1.1 pts m/o/m. So did the non-manufacturing figure at 50.4 vs 50.2. The private sector Caixin China manufacturing print was 50.8 from 50.1. The Lunar New Year always distorts the January/February numbers. Caixin said, “Overall, the market showed clear signs of recovery, with manufacturers launching new products.” And, “Optimism among manufacturing entrepreneurs continued to grow. The gauge for future output expectations rose close to its historical average, matching a level last seen in November. Entrepreneurs had relatively high hopes for future market supply and demand.”
There were some caveats though in the commentary. “China’s economy still faces significant challenges, with rising uncertainties in employment and household income constraining efforts to boost domestic demand and stabilize the economy.”
Elsewhere…
Elsewhere, the final Japan one (we already saw the preliminary one) was 49 vs 48.7. Australia’s was 50.4 vs 50.2. Taiwan’s rose to 51.5 from 51.1. Vietnam’s was at 49.2 from 48.9 and it was below 50 too in Malaysia at 49.7, though up 1 pt. Thailand’s increased 1 pt to back above 50 at 50.6. Indonesia was at 53.6 from 51.9 while the Philippines fell to 51 from 52.3. India’s final February print was 56.3 from 57.7 and still outperforming all of its global peers.
Here were some other notable comments from some countries.
On Taiwan, “Taiwan’s manufacturing sector was revitalized in February, posting faster increases in key factory health barometers such as production, output, purchasing and inventories…February’s growth in new factory orders also appears to reflect diverse strength across the customer base, with panelists reporting domestic and overseas markets like Europe and the US as sales drivers.”
On Vietnam, “Manufacturers in Vietnam reported subdued demand conditions again in February, with the sector struggling to gain momentum in 2025 so far. On a more positive note, firms were increasingly optimistic about the future path of output, although confidence was often based on hopes that economic conditions was often based on hopes that economic conditions will be stable in the months ahead.”
On Japan, “The near term outlook remains clouded, as firms continued to work through backlogs of work at a solid rate, a sign that new order inflows are not enough to sustain production. Moreover, confidence in the year ahead outlook weakened from that seen in January to the lowest since mid 2020, as firms highlighted the potential downside risks of US protectionist trade policies and a slower than anticipated economic recovery.”
On India, “Robust global demand continued to boost growth in the Indian manufacturing sector, which increased its purchasing activity and employment. Business expectations also remained very strong, with nearly one-third of survey participants foreseeing greater output volumes in the year ahead. Although output growth slowed to the weakest level since December 2023, overall momentum in India’s manufacturing sector remained broadly positive in February.”
European Challenges
Europe continues to have its manufacturing challenges and its final manufacturing PMI was 47.6, up .3 pts from the initial figure and up 1 pt from January. It was last above 50 in June 2022. Germany at 46.5, France at 45.8 and Italy at 47.4 all were a drag and even Spain’s softened at 49.7 from 50.9 in January and it’s the first time below 50 for them since January 2024.
S&P Global is seeing the glass as maybe half full though for Europe. They said “the PMI hints that the manufacturing sector might be finding its footing. New orders are falling at the slowest pace since May 2022, and production is edging closer to stabilizing. So, after almost three years of recession, we could see a bit of growth in the coming months.”
At least on the defense side, the coming flood of spending is certainly going to help anyone touching that space and defense stocks in Europe today are all trading higher again today.
Dreaded Stagflation
Stagflation remains a problem as “Cost pressures facing Eurozone factories intensified midway through the first quarter as the rate of input price inflation quickened to a six month high.” It’s more a margin hit though as “The latest data implied that these greater expenses were absorbed by companies as output charges were discounted marginally since January.”
The final UK manufacturing PMI was 46.9, down from 48.3 in January and the lowest since December 2023. S&P Global said “Weak demand, low client confidence and rising cost pressures are accelerating the downturns in output and new orders, while the Autumn Budget’s changes to the national minimum wage and employer NICs are driving up inflation fears and intensifying the downward trend in staff headcounts. The pace of manufacturing job losses is currently running at a rate not seen since the pandemic months of mid 2020.”
Stagflation remains the word here too and through the entire supply chain, as “Underlying price pressures continued to climb in February, with rates of inflation in input costs and output charges both accelerating…Selling prices meanwhile rose to the greatest extent since April 2023, reflecting the pass through of current and expected cost increases to clients, higher staff costs and increased tax burdens.”
Speaking of inflation in the Eurozone, the February CPI rose 2.4% y/o/y, one tenth more than expected, though down from 2.5% in January. The core rate at 2.6% was also one tenth above the estimate but down one tenth from the month before. The ECB meets on Thursday and is fully expected to cut rates again to 2.50% which would essentially put its REAL rate at zero.
With the likely huge increase in defense spending and possibility of a bottoming in the region’s economy with hopes of economic liberalization too, the ECB is playing with fire getting so easy again with inflation supposedly their sole mandate. The 5 yr 5 yr euro inflation swap is higher by 4 bps to 2.08% in response to the slightly higher inflation print, though well off its 12 month high of 2.39%.
The possibility that this could be the last rate cut for a while has the euro higher and bond yields up across the region.
Gold & Silver Takedown
To listen to James Turk discuss the takedown in the gold and silver markets and what to expect next CLICK HERE OR ON THE IMAGE BELOW.
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