The U.S. dollar was hammered versus the Yen, trading near its seven week low after a large sell-off made safe havens more attractive. One beneficiary was the Swiss Franc, which reached a three week high against the dollar.
Weak Chinese Reports Worry Markets
Markets have been rattled by weak manufacturing reports from China that suggest its economy is slowing down. Manufacturing activity fell in January to the level of 49.6 following a 50.5 performance in December. The announcement prompted concerns in the markets, leading to a move into safe havens like the Japanese Yen and Swiss Franc. It also led to the advance of German bonds to a one month high with yields falling to five month lows.
Securities in Italy fell following the recent news from China, and Spain also found its securities dropping for the first time in recent weeks. The U.S. dollar also continued to be weak, although most of the weakness is thought to be a result of the markets anticipating further tapering by the Federal Reserve.
The Euro gained ground versus the U.S. Dollar for a number of reasons, including the release of PMI numbers. Services and manufacturing beat expectations, and the region’s largest economies except Germany saw robust numbers in both sectors.
The Services PMI in the E.U. beat expectations of 51.5, coming in at 51.9, while manufacturing beat expectations of 51.5 with a figure of 51.9 — the largest increases since the summer of 2011. The Euro strengthened in spite of bearish sentiments expressed by the President of the European Central Bank. The President’s inflation concerns were not shared by many economists who feel the Euro could continue to advance if economic data continues to be positive.
The price of gold spiked to its highest level in nine weeks as inflows came from investors spooked by stock market losses and concerns about emerging markets.
Many economists expect more weakness in the markets as more data emerges from China. The Federal Reserve should also have an impact with further tapering expected to affect the stock market and emerging markets.