Stocks fell Wednesday as less than stellar manufacturing numbers from Europe and China trumped good US housing numbers. The Dow Jones was down 48 points, the Nasdaq was down 15 and the S&P 500 was down 6 points.
The manufacturing reports were by Markit Economics. Their purchasing manager’s index, which measures business activity in the European Union, fell to 49.7 this month from 50.4 in January. Analysts wanted to see an increase to 50.6. As a side note, a reading under 50 means the country’s economy is experiencing a contraction.
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The second purchasing manager’s index was from China. Chinese numbers came in at 49.7 this month, an increase since January when the index read 48.8.
“Growth remains on track of slowdown, despite the marginal improvement in the headline flash PMI led by quickened production after the Chinese New Year,” said Hongbin Qu, a chief economist at HSBC. “With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth” (MSN Money).
Obviously, these are some worrisome numbers, especially China. Investors have been worried about a possible Chinese slowdown and unfortunately according to Markit Economics’ index, China’s economy is contracting right now. Part of the issue is that the Yuan is very strong right now and a strong currency certainly hurts exports. Some Chinese companies are moving operations to the United States because the Yuan has a strangle hold over exports and importing countries aren’t likely to continue buying a lot from that country for the simple reason that prices are higher.
The global recovery is certainly in a delicate state right now. It seems like once we get good news on a troubled area such as US housing, we get bad news, China’s manufacturing numbers. Luckily, China’s numbers have improved since January but they still float under 50. As for Europe, it really isn’t that much of shock that they reported a less than appealing number. The EU is focused on combating debt right now, which is important but little things such as weak manufacturing numbers certainly take their toll as well.
The economy is in a rough spot right now. The United States is showing improving housing numbers; however unemployment and debt still plague our economy. China’s economy is walking the line right now. Manufacturing improved but it is still under that critical level of 50. Europe is a mess; they are trying to take care of all these different issues with little success so far. Today could possibly be the start of a pullback as well so keep an eye out for cheaper prices in the near future.