LONDON — The clear signal from the U.S. Federal Reserve that it will soon stop pumping money into the global economy and data pointing to Chinese growth slowing sparked sharp falls in bonds, shares and commodities on Thursday.
Emerging markets, many of which have been primed by the cheap Fed cash, saw some of the biggest selling as investors rushed to the exits.
Different markets sending different signals. That's the gist of BofA Merrill Lynch rates guru David Woo's latest report – titled "The impossible trinity: A tale of three cities" – which begins like this (emphasis added):
The HSBC China Flash PMI tumbled to an eight-month low of 48.1 from 48.5 in February. Economists were looking for the index to climb to 48.7. And any reading below 50 signals contraction. Interestingly, markets have held up in the wake of the news. China's Shanghai Composite climbed 0.9% and Hong Kong's Hang Send jumped 1.9%.
NEW YORK/LONDON — Manufacturers in the United States, China and Europe struggled last month as demand fell, suggesting an ailing world economy that still needs a steady diet of central bank support.
Output at U.S. factories declined in May for the first time in six months, the Institute for Supply Management reported, while China’s massive manufacturing sector shrank for the first time in seven months, adding to concerns that the world’s two largest economies were losing momentum in the second quarter.