This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Overnight, the HSBC survey of manufacturing in China revised down its previous estimate for May. The bank originally reported the manufacturing purchasing manager’s index (PMI) to be 49.6 in May, but it has now lowered it to 49.2; any reading below 50.0 highlights a contraction in the sector. This figure now differs even more significantly from China’s official manufacturing data, which came in at 50.8 in May. However, the markets indicate that equity traders have more confidence in HSBC's figures, as they have sold stocks this afternoon, indicating fears that the second largest economy in the world is slowing down.
To add to the worries, manufacturing figures from Italy and Spain were also weak; the manufacturing industry has contracted for 23 and 25 months consecutively for Italy and Spain respectively.
In the US, the Dow is up 40 points at 15,155, as stronger than expected manufacturing PMI figures gave traders a reason to buy back into the market after Fridays dip. The final PMI report for May came in at 52.3, when economists were expecting 52.0.
Traders will now be looking ahead to Friday’s non-farm payrolls report, where we might see low trading volumes up to the announcement. If the report comes in better-than-expected, we might see traders sell their equity positions in anticipation of the Federal Reserve scaling back their stimulus package in response to unemployment falls.