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Last night, ISM Manufacturing PMI beat estimate and increased to 49.5 (prior 48.2, forecast 48.5) highest in 5 months. Although, ISM Manufacturing PMI have been in negative territory. A PMI of more than 50 represents expansion of the sector. A reading under 50 represents a contraction.
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In the wake of better U.S. economic data, Investors have increased their expectation for Fed rate hike to 62.3% from 30.3% on prior day and increased from 30.3% in previous mouth.
Wells Fargo’s Economist said, The ISM manufacturing index rose almost to the break-even. At 49.5, it is roughly sideways, but at least not worse. Production and orders are expanding and employment improved. Input prices remain weak.
The new orders index (middle graph), the most forward-looking component of activity, remained positive at 51.5, corroborating last week’s gains in durable goods orders.
The prices paid component continues to signal deflation in the industrial sector and little pricing power for businesses (bottom graph). The price index increased to 38.5 with only the fabricated metals industry indicating that it paid higher prices. Prices paid have been in negative territory for 16 consecutive months—the longest streak since 1998-1999. Weaker input prices are consistent with continued weakness in core finished goods PPI and reinforce the message that inflation pressures remain muted relative to the FOMC’s expectations of two percent inflation anytime this year.
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Moody's Investors Service Wednesday lowered the outlook on China's credit rating from stable to negative, citing a weakening of fiscal metrics and a continuing fall in foreign exchange reserves.
The rating agency also noted uncertainty over the capacity of authorities to implement the reforms needed to address imbalances in the world's second-largest economy.
A downgrade was possible if the reform drive slows, public debt rose and capital outflows accelerated, Moody's said.
Moody's current Aa3 rating on China is seven notches above junk so even if the agency were to follow up on its warning and lower the rating, investors won't have to suddenly start selling the country's bonds.
Rival Standard & Poor's assesses China's creditworthiness at similar levels to Moody's, while Fitch rates China a notch lower. S&P and Fitch both have stable outlooks on the country.
Oil prices fell on Wednesday in the wake of industry data that showed a huge build in U.S. crude stockpiles that were already at a record high.
U.S. crude inventories rose by 9.9 million barrels last week, data from the American Petroleum Institute showed after Tuesday's settlement. That was well above a 3.6-million barrel increase expected by analysts in a Reuters poll.
Russian oil companies have agreed not to increase oil production this year following preliminary deal between Russia, Saudi Arabia, Qatar and Venezuela reached last month, President Vladimir Putin told a meeting with the country's top oil firms.
Global oil prices appear to have bottomed out and are expected to rise through this year as investment cuts help to reduce a supply glut, a senior analyst at the International Energy Agency said on Tuesday.
"Sentiment has clearly shifted for commodities in the last fortnight," ANZ bank said on Wednesday. "Both crude oil and iron ore prices hit a one-month high overnight. The price action in oil adds to the case that the bottom in the crude oil market is now in place."
Reference: CME Group FedWatch, Trading Economics, Wells Fargo Economic Indicators Report, CNBC, Reuters
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