Winter seems to have arrived earlier this year
Globally, the Eurozone's PMI was up s l ightly, from 44 to 45.1, but well below 50, where it has been for the past 13 months. The US ISM manufacturing was down from 49.8 to 49.6. The change was small, but we view any drop from the already low level as disappointing. The index has remained below 50 for the past three months. For Asia, the important part is the US ISM new orders, which dropped from 48 to 47.1 for August .
Finally, the global PMI continued to trend lower, from 48.4 to 48.1, which is the lowest since June 2009. Both output and new orders dropped substantially, from 48.8 to 47.4 and 47.1 to 46.8, respectively.
The latest indicators support our view that the demand environment, both externally and internally, remains very harsh for Asia. We think four centres are the most vulnerable (Hong Kong, Singapore, Taiwan and Korea) because of their dependence on the G3 and intra-Asia demand. Our 2012 GDP forecasts for these centres (1.5%, 2%, 2.3% and 3.2%, respectively) have been distinctively lower than those of FocusEconomics. However, we find ourselves closer to the consensus now, as the market turned more negative recently. That said, given more incoming signals, we are reviewing our forecasts for both 2012 and 2013.
Eoin Treacy's view Yesterday's market action was dominated by the ECB's renewed commitment to act as a lender of last resort. Today's impressive rally by the Chinese stock market reflects a growing sense that the Chinese are beginning to unwind their tightening bias which has prevailed for nearly three years.
Amidst these rather momentous events it is easy to overlook the concerns which led to them. There has been a great deal of evidence pointing towards a global economic slowdown over the last six months. When we appraise the outlook for risk assets and their reliance on the provision of additional liquidity, we ask the simple question, do deteriorating fundamental statistics make additional monetary easing more or less likely? Additional easing may be in the pipeline for a significant number of Asian economies.