Good morning! Here’s what you need to know in markets on the first trading day of the new year.
Draghi Kicks Off The New Year With A Deflation Warning. “The risk that we do not fulfil our mandate of price stability is higher than six months ago,” European Central Bank chief Mario Draghi was quoted as saying by the German financial newspaper Handelsblatt. “We are in technical preparations to adjust the size, speed, and compositions of our measures in early 2015, should it become necessary to react to too long a period of low inflation.”
Europe Is Stagnating. The eurozone’s manufacturers hinted at extremely weak growth in December, with a score of 50.6 in Markit’s purchasing manager’s index (PMI). The score was slightly above November’s 50.1, but the fourth quarter overall was the worst for European industry since the third quarter of 2013, when the currency union was just emerging from a technical recession. “Eurozone factory activity more or less stagnated again in December, rounding off a year which saw an initial, promising-looking upturn fade away and stall in the second half of the year,” Markit’s Chris Williamson said. “The weakness of factory output, combined with the subdued service sector growth signaled by the flash PMI, suggests the eurozone economy grew by just 0.1% in the fourth quarter.”
Europe’s 2nd- And 3rd-Largest Economies Are In Negative Territory. Manufacturing PMIs From France and Italy came in below 50, the breakeven level for growth. France’s PMI fell to 47.5 in December, and Italy’s fell to 48.4. “[M]oribund demand continues to weigh heavily on the sector and, with the battle over the government’s proposed economic reforms only just beginning, a turnaround remains unlikely anytime soon,” Markit’s Jack Kennedy said of France. Here’s Markit’s Phil Smith on Italy: “Factories have cut back production amid falling intakes of new orders, particularly among domestic clients, and this trend looks set continue as new business fell to the greatest extent for over a year-and-half in December, and backlogs were depleted sharply. Without the support from export sales, the situation would be worse still.”
The Chinese Economy Spluttered In December. China’s factory activity sputtered in December, underlining the challenges facing the country’s manufacturers as they fight rising costs and softening demand in a cooling economy. The government’s purchasing manager’s index came in at 50.1, barely above the neutral 50 level.
Markets Are Up. US futures are in the green, with Dow futures up 61 points and S&P futures up 6 points. In Asia, Hong Kong’s Hang Seng closed up 1.0%. Japan’s Nikkei and China’s Shanghai Composite were both closed Friday. In Europe, Britain’s FTSE 100 is down 0.2%, France’s CAC 40 is down 0.5%, and Germany’s DAX is down 0.8%.
US Manufacturing Data Coming. At 9:45 a.m. ET, we’ll get the Markit US manufacturing PMI, which is expected to have risen to 54 in December. That will be followed at 10 a.m. by the ISM manufacturing index, which is expected to have slipped to 57.5 in December. The November construction spending report will be released at 10 a.m.; economists estimate that metric grew by 0.4% during the month.
Russian Oil Output Hits A Post-Soviet-Era High. “Russia’s 2014 oil output hit a post-Soviet record high average of 10.58 million barrels per day (bpd), rising by 0.7 per cent helped by small non-state producers, Energy Ministry data showed on Friday,” Reuters’ Vladimir Soldatkin reported. “Russian producers capitalised on rising oil prices in the first half of 2014, when they reached over $US113 per barrel. However, they have halved since then.”
GM Is Recalling 92,000 More Cars Over Ignition Switch Problems. General Motors on Thursday announced a recall of more than 92,000 additional vehicles over ignition switch problems blamed for 42 deaths. The largest US automaker has already recalled millions of cars over the defect.
Iran Says Saudi Arabia Is Making A Serious Mistake Over Oil Prices. Falling world oil prices will hurt countries across the Middle East unless Saudi Arabia, the world’s biggest crude exporter, takes action to reverse the slump, Iran’s deputy foreign minister told Reuters.
Thomas Piketty Refuses To Accept France’s Highest Honour. The author of “Capital in the 21st Century” on Thursday refused to accept the country’s highest award, the Legion d’honneur, “I refuse this nomination because I do not think it is the government’s role to decide who is honorable,” Piketty told AFP.