A Look At Monday’s Key Market Events

A Look At Monday’s Key Market Events

This month opens with more economic and earnings news for the market to digest.

Monday morning, market traders and investors will be reacting to the manufacturing Purchasing Managers Index (PMI) readings out of China, released Saturday and Sunday.

BEIJING, CHINA – JUNE 05: A giant panda rests at the Beijing Zoo on June 5, 2012 in Beijing, China. With an estimated 1,600 living in the wild, the endangered giant panda dwell in a few mountain ranges in central China, in Sichuan, Shaanxi, and Gansu provinces. (Photo by Lintao Zhang/Getty Images)

I. China’s PMI readings for October

a. Official Manufacturing PMI (Saturday, 31 October at 9:00p EDT) came in at 49.8, The indicator tracks activity in China’s crucial factory and workshop sector and was unchanged from the previous month. A figure above 50 signals expansion, while anything below indicates shrinkage
b. Caixin Manufacturing PMI (Sunday, 1 November at 9:45p ET)  A recent poll by Thomson Reuters revealed a small improvement to 47.5 from 47.2 in September is expected.

Why they are important

1. Concerns are festering about the economic slowdown in China. The manufacturing PMI reports offer insight into the level of business activity for China’s manufacturing sector and will either heighten or calm those concerns.
2. The dividing line between expansion and contraction is 50.0
3. The Caixin reading, which is formed from responses of purchasing managers working predominately at smaller firms in China, is seen as being the more informative data point for market participants since the government’s official manufacturing PMI report hinges on responses from purchasing managers at a lot of large, state-owned businesses
4. While a reading below the prior month’s reading would stoke speculation Chinese authorities need to do more to stimulate growth, a decline from the prior month would also compound the concerns in global equity markets about the economic slowdown in China. Those concerns, which have been prevalent, could be tempered for the time being with a better than expected report.

A closer look

1. The Caixin PMI report has been under 50.0 (signaling contraction) for 7 months running, while the official manufacturing PMI report has been under 50 the last 2 months
2. The final Caixin PMI reading for September was 47.2, which was the lowest level since July 2013
3. The official manufacturing PMI reading for September was 49.8, up a tick from the August reading of 49.7

What’s in play?

China ETFs

1. iShares China Large-Cap (FXI)
2. ProShares UltraShort FTSE China 50 (FXP)
3. Deutsche X-trackers Harvest CSI 300 (ASHR)

ETFs for regional markets

1. iShares MSCI Japan (EWJ)
2. iShares MSCI Australia (EWA)
3. iShares MSCI Hong Kong (EWH)
4. iShares MSCI South Korea Capped (EWY)
5. iShares MSCI Singapore (EWS)
6. iShares MSCI Taiwan (EWT)
7. iShares MSCI Malaysia (EWM)
8. iShares MSCI Emerging Markets (EEM)

Index ETFs

1. SPDR S&P 500 ETF (SPY)
2. PowerShares QQQ Trust (QQQ)
3. iShares Russell 2000 (IWM)

Currencies

1. USD/CNY
2. USD/JPY
3. EUR/USD

S&P futures

Commodities

Treasuries

Have a terrific week.

HeffX-LTN

Paul Ebeling

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