Economist and Hedge Fund Manager Shayne Heffernan of takes a look at the FX Pre-Market EUR/USD, AUD/USD, GBP/USD, USD/JPY

Two manufacturing surveys in China, released Thursday, showed improvement for the month of October, adding to signs that the world’s second largest economy may be recovering from its worst slump since the 2008 global recession.

The state-sanctioned China Federation of Logistics and Purchasing’s monthly purchasing managers index improved to 50.2 from September’s 49.8 on a 100-point scale, indicating expansion. Separately, HSBC Corp. said its own PMI improved to an eight-month high of 49.5 from September’s 47.9, though it still showed activity contracting.

That gave momentum to stocks in the region. China’s Shanghai Composite index led gains, rising 1.8 percent, to 2,105.60. Hong Kong’s Hang Seng index rose 0.6 percent, to 21,772.60. Stocks in Taiwan also gained.

Europe Market Snapshot

Eurozone unemployment hit a record high 11.60% with youth unemployment continuing its upwards march. Greece has made its way back to the spotlight as the proposed deficit reduction extension has yet to satisfy demands of European lawmakers and lenders.

Equities traded lower following the American reopening with the Spanish IBEX and Italian MIB outperforming peers, rising 0.11% and 0.12% respectively.

Greece saw its manufacturing PMI easing from 42.1 to 41.0 in October. The same data rose more than expected in Switzerland, from 43.6 to 46.1 (consensus of 44.5). Switzerland retail sales (YoY) eased less than expected, from +6.0% to +5.4% in September (consensus of +4.2%).

UBS analysts are bullish on the EUR/USD: “The risk is for more upside in the near-term and a break above 1.3042 would trigger potential test of 1.3172”, wrote analyst Gareth Berry, pointing to support at 1.2883 ahead of 1.2802.

The UK FTSE 100 vastly underperformed mainland European peers, dipping -1.15% while the French CAC 40 fell -0.87%. Although many indices had been positive during the session, the move completely reversed into a sea of red as the morning session meltup turned into an afternoon meltdown. EURUSD faded its entire move above the 1.30 handle, trading now at 1.2961.

GBP/USD Ichimoku cloud top (now at 1.6089) should limit downside. Only below the lower Kumo (now at 1.6065) would abort and suggest top is possibly formed and risk weakness to 1.6040-45 but support at 1.6007 should remain intact.

Asia Market Snapshot

The official Chinese Manufacturing PMI figures out earlier showed the first expansion in months as the HSBC flash PMI still sits below the 50 threshold and shows contraction.

Coupled with the positive PMI data is a slight rise in home prices which show renewed interest in real estate purchases.

Equity indices are trading mixed as the Hang Seng rallies 0.60% on the manufacturing expansion while the Nikkei continues its own winning streak, rising 0.29%. Australian ASX is a different case, experiencing steep losses of -1.18% as commodity prices resume their tumble lower.

AUDUSD has only ticked slightly lower while the Yen has weakened dramatically following this week’s easing announcement. For the AUD we are still looking for a move lower to the 1.02 range. USDJPY has rebounded overnight, jumping 0.34% to 80.040. For the Yen the key support is at 79.27, only break below this level will suggest that the uptrend from 77.43 has completed at 80.37 already, then the following downward move could bring price back to 77.00 zone.

US Market Snapshot

Although futures pointed higher, major American equity indices ended the session lower as New York gradually cleans up from Hurricane Sandy.

The damage estimates are still being assessed but trading has resumed. Losses were led by the Nasdaq, declining -0.36% as major component Apple underwent recent management changes and closed below the $600 level. The Dow Jones was also weaker, losing -0.08% while the S&P 500 was able to outperform, gaining a marginal 0.02%.

The energy complex is slightly higher, with Natural Gas rising 0.38% and WTI crude futures back above the $86 handle to $86.27 per barrel. Gold has also held onto yesterday’s gains, rising an additional 0.12% to $1721.20.

Today’s Key Economic Releases
Currency Time (GMT) Event
GBP 10:30 Manufacturing PMI
BRL 12:00 Brazilian Industrial Production (YoY)
USD 13:30 ADP Nonfarm Employment Change
USD 13:30 Initial Jobless Claims
USD 13:30 Continuing Jobless Claims
USD 15:00 ISM Manufacturing Index


Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service

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