Good morning! Here’s what you need to know.
— China flash PMI came in at 48.3, a seven-month low that missed expectations for a less severe decline of just 49.5. “February’s flash reading of the HSBC China Manufacturing PMI moderated further as new orders and production contracted, reflecting the renewed destocking activities,” HSBC’s Hongbin Qu commented. “The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening.” “After an above-trend fourth quarter of 2013, real GDP growth is likely slowing in early 2014, inline with a year of real GDP growth of about 7.5 per cent,” PNC’s Bill Adams said.
— Markets are selling off around the world as a result. Japan’s Nikkei is off 2%. Hong Kong’s Hang Seng and Germany’s DAX are down 1%. “China’s flash PMI shocks the market again,” said Societe Generale’s Wei Yao in a note to clients today. BI’s Sam Ro explained how similar events led to turmoil in the emerging markets exactly a month ago.
— A counter argument is already emerging though: that Chinese New Year tends to skew winter PMI readings. “Surely this flash PMI has quite big market impact and markets have already been hit today,” said Bank of America Merrill Lynch’s Ting Lu. “However, our suggestion is still to downplay it due to the poor quality of this HSBC flash PMI in the year beginning. The survey period of the HSBC flash PMI was 12-18 Feb, but the first six days in February are national holidays and many SMEs, which could be the majority of the HSBC PMI sample, were not open until mid-Feb, so the quality of this flash PMI could be quite low.”
— Facebook bought messaging app WhatsApp for up to $US19 billion. The service has 450,000 users, many of them abroad, and Andreessen Horowitz’s Benedict Evans says it’s possible it processes more messages than regular texting. BI’s Nich Carlson reports how the deal went down.
— Facebook shares fell after hours following the announcement. “The cost of delivering increased engagement is higher than we are comfortable with,” Evercore said in a note cutting shares to equal weight.
— Tesla shares surged as much as 16% in after-hours trading after reporting strong earnings and revenue. It now sees weekly production rates rising to 1,000 Model S vehicles from 600, and expects more than 55% vehicle delivery growth in 2014. “Deliveries will grow dramatically in future quarters as the logistics pipeline fills,” the company said.
— A brief truce in Kiev was shattered as 35 were killed in ongoing clashes. EU foreign ministers were expected to meet with President Viktor Yanukovich to offer sanctions and enticements to end the conflict, but discussions were delayed over security risks. Protesters want to overthrow the government. “Russia, which has been holding back a new loan instalment until it sees stability in Kiev, has condemned EU and U.S. support of the opposition demands that Yanukovich, elected in 2010, should share power and hold new elections,” Reuters said.
— Eurozone composite PMI disappointed at 52.7. “A dip in the eurozone PMI provides a reminder that the region‟s recovery continues to be uneven and fragile,” said Markit’s Chris Williamson. “The slight easing in growth is disappointing, but it‟s too early to read too much into one month‟s data, especially as the rate of growth of new orders picked up to its highest since mid-2011. Germany continues to look strong; France continues to look weak.
— Busy day today in data: at 8:30 a.m. eastern we get consumer price index and weekly jobless claims. Then just before 9 we get U.S. flash PMI. Finally at 10 a.m. we get Philly Fed and the Leading Indicators report from the Conference Board. Plus commodities pits are eagerly awaiting the EIA’s weekly natural gas report as prices flirt with four-year highs.
— Walmart reported this morning Q4 earnings and revenue that came in in-line with expectations. Guidance came in slightly lower, comps were weaker. Walmart shares are down 0.5% premarket on the news. HP and Groupon report earnings after the bell.