OPEC Unlikely to Reach Output Accord Today

Daily Analysis - 02/06/2016

The Biannual OPEC Meet Starts Today in Vienna


The two-day OPEC meeting starts today in Vienna with the memories of the failed Doha talks back in April still fresh in investors’ minds. Very little is expected from the talks as oil prices retreat after a strong three month rally, which saw WTI Crude briefly touch the $50 psychological level before retracing.


China Official Manufacturing PMI Unchanged At 50.1

The official manufacturing PMI for May was unchanged at 50.1, same as in April, data from National Bureau of Statistics showed on Wednesday. The median estimate was for a decline to 50 in China. The official non-manufacturing PMI was also weaker in May, falling to 53.1 compared to 53.5 in April. The Caixin manufacturing PMI on the other hand, which uses a smaller sample set than official PMI slipped as well. The soft print in manufacturing and non-manufacturing signals continued weakness, despite a brief pick up in manufacturing earlier this year.


UK Manufacturing PMI Rises Back Above 50

Manufacturing in the UK increased modestly in May, rising to 50.1 following a decline to 49.4 in April, data from Markit showed on Wednesday. The increase in manufacturing PMI which indicates an expansion came above consensus estimates of an increase to 49.9. Despite the index climbing back above 50, manufacturing continues to remain sluggish in the UK. Input costs and average selling prices improved for the month but production volumes remained unchanged on account of subdued new order inflows. New work from domestic clients edged higher but new export business fell for the fifth consecutive month.


US Manufacturing Activity Rises in May

US manufacturing activity, measured by the ISM Manufacturing index rose to 51.3 in May, extending the gains from 50.8 in April and beating expectations of a drop to 50.3. May's manufacturing gauge signaled that the sector could be stabilizing on easing pressures from a strong US dollar and higher oil prices. However, employment remained weak, unchanged at 49.2 from April. Markit’s PMI, which is another gauge of the manufacturing sector also showed modest improvements. However, Markit analysts said also that new business growth fell to its weakest levels this year, contributing to a decline in production volumes.


ECB Expected To Hold Policy Steady at Today's Meeting

The European Central Bank's monetary policy is expected to see no major changes, with the central bank forecast to leave its 1.8 trillion euro stimulus package and interest rates unchanged. Expectations are rising that the ECB will hike its inflation forecasts for the first time this year, acknowledging the higher oil prices. However, it is still questionable considering that latest flash inflation estimates showed the Eurozone suffering from deflation, as the consumer price index fell 0.10% in May on a year over year basis. The ECB policy decision will be followed up by Mario Draghi's press conference.


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