94231 Daily Economic News – Feb. 2, 2015 AUTHORS Derek Chen (x-81602) Eung Ju Kim (x-85804) Mizuho Kida (x-31943) Global equities fall on poor China and U.S. data… U.S. consumer spending declines more than expected in December… Russian manufacturing PMI drops to 67-month low Financial Markets Global stock markets were struggling on Monday as disappointing economic data from China and U.S. overshadowed a rally in energy-sector stocks. Oil prices extended a rise from the lowest level in nearly six years as investors speculated the biggest strike by U.S. oil workers since 1980 may lead to lower gasoline production down the line. Asian shares slid for a fourth day with China’s benchmark Shanghai Composite Index capping a five-day decline of 7.5% after Chinese manufacturing gauge fell in January for the first time in two years. European shares were also weaker as Spanish shares pushed the region’s stocks lower for a third day. U.S. equities traded lower as well after weak manufacturing and consumer spending data prompted concerns about the health of the world biggest economy. The Russian ruble continued to weaken against the dollar after the central bank’s unexpected interest - rate cut last week eroded support for the currency as Russian companies face $10.2 billion of external- debt repayment this month. For those companies without the needed hard-currency reserves, that means converting rubles to euros and dollars, which may exert additional pressure on the Russian currency. The ruble was trading down 0.5% at 69.2250 against the dollar after slumping as much as 2.3% in earlier trading. High Income Economies With modest slowdown in new order and employment growth, the Institute of Supply Management (ISM) manufacturing Purchasing Managers’ Index (PMI) for the U.S. came in at 53.5 in January, weaker than the 54.5 economists had forecast and down from 55.1 in December. A reading above 50 on the index signals expansion. More than three quarters of industries measured recorded growth in the month, such as the electronics, food and beverage and transportation equipment sectors. However, congestion at 1 U.S. ports following a labor dispute on the west coast also crimped activity, weighing on imports and exports, as well as inventories. At the same time, despite a rise in personal incomes, U.S. consumer spending declined 0.3% (m/m) in December, after a downwardly revised 0.5% jump in November. The decline was more than the 0.2% decrease forecast by economists, and came as personal incomes climbed 0.3% in December, which exceeded economists’ expectations of a 0.2% increase. As output and new orders ticked higher, the Markit / Chartered Institute of Procurement & Supply manufacturing PMI for the U.K. rose to 53 in January, higher than economists’ expected level of 52.8 and December’s reading of 52.7. The index has remained above the neutral 50-mark in each month since April 2013. Developing Economies East Asia and Pacific China’s HSBC manufacturing purchasing mangers’ index (PMI) came in at 49.7 in January, slightly less than the “flash” estimate of 49.8, and marking the second consecutive month of contraction following December’s 49.6. A reading above 50 indicates expansion in the sector while a reading below 50 indicates contraction. Among the individual components of the survey, input costs fell for the sixth month with lower prices for oil and steel playing major roles in the decline. Employment levels also declined for the fifteenth month. Europe and Central Asia Russia’s HSBC manufacturing PMI dropped to 47.6 in January, its lowest level since June 2009, and down from 48.9 in the previous month. New export orders fell for the 17th consecutive month, resulting in a drop in output for the first time since May. Employment also shrank for the 19 th consecutive month and at the fastest rate since July 2009. On the price front, input price accelerated to the highest since October 2008 due to weakening ruble. Selling prices also marked a new survey record in January. South Asia India’s HSBC manufacturing PMI declined to 52.9 in January from the two-year high of 54.5 in December. The reading was a three-month low although still signaled solid expansion. Output and new orders continued to grow, although at a slower pace than the previous month. Employment levels rose marginally. On the price front, input and output price inflation moderated further due to cheaper commodity prices. 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