Positive Purchasing Managers reports from most major economies has pressured safe haven categories such as precious metals and bonds today. The official Chinese PMI report for November was 51.4, while the private HSBC Chinese PMI (which many traders put more faith in) came in at 50.8, beating estimates. Japan’s PMI hit 55.1 from 54.2 in October, its highest level since July 2006. A weak yen helped exports hit a 3-year high.
The Markit US PMI hit a 10-month high of 54.7 in November, up from 51.8 in October. The ISM PMI showed 57.3, up from 56.4. Composite EU PMI showed a fifth month of positive growth, at 51.6. This is up from 51.3 in October. The numbers were not all good, though, as France and Spain both showed contraction in their manufacturing sectors, while Germany’s powerhouse economy pulled the composite numbers into positive territory.
The UK showed unexpected economic strength, as the economy revved to 58.4, blowing away estimates, and ramping up expectations that the Bank of England will have to raise low interest rates next year. The pound Sterling hit a five-year high on the news, and hit an 11-month high versus the euro.
The dollar is higher today, hitting a 6-month high versus the yen, and assisted by a drop in the euro. Treasury yields and German bond yields are up, as precious metals are hit by the ISM PMI report.
Expect to see selling in precious metals into the end of the year, as investors take a loss on recent price dips to counteract capital gains earned in the stock market. Also expect “taper anxiety” as the last Federal Reserve Open Market Committee meeting on December 17 and 18 loom. The press conference afterwards will be Ben Bernanke’s last as Fed Chairman, which is why we may not see a taper to the $85 billion a month in bond purchases for Christmas. (It just wouldn’t be right to lob a grenade into the room as he leaves.) Also look for political posturing to begin later in the month over the budget and debt ceiling fight that Congress punted on in September.