Global Manufacturing PMI Fell To 49 In Dec’2

In Asia, conditions seem to be slightly better

Sonal Badhan,

Economist,

Bank of Baroda

Mumbai, January 3, 2024: Global manufacturing activity remains under duress, as contraction was reported in 23 out of 29 surveyed countries by Markit PMI. Global manufacturing PMI fell to 49 in Dec’23 from 49.3 in Nov’23. Downturn deepened in US (47.9 versus 49.4) and UK (46.2 versus 47.2). In Eurozone, pace of contraction eased a tad (44.4 versus 44.2), but the the biggest economies (Germany and France) continued to report faster pace of deteriorating conditions. In Asia, conditions seem to be slightly better. Singapore’s Q4CY23 GDP rose by 2.8%, following 1% rise in Q3, mainly on account of gains made in manufacturing and construction sector. 

Domestically, RBI has issued new rules regarding declaration of dividends by banks. The proposed rules will be effective from FY25. It was suggested that net NPA ratio for a financial year for which dividend is announced, should be lower than 6%.

Barring Dow Jones, other global indices ended lower. Investors await key payrolls report scheduled later this week, in order to gauge the timing of Fed rate cut. Fed is expected to hold rates in Jan’24 and start the rate cut cycle in Mar’24. Sensex ended lower and was dragged down by losses in cap goods and auto stocks. It is trading lower today in line with other Asian markets.

•  Global currencies closed lower. DXY rose to a near 2-week high (0.9%). Investors kept a close watch on factors such as elevated treasury yields and await the release of Fed minutes and monthly jobs report in order to gauge Fed’s rate trajectory. INR depreciated despite a dip in oil prices. However, it is trading stronger today, while other Asian currencies are trading mixed.
•  Apart from China (flat), other global yields inched up, with 10Y yields of UK (+10bps) and US (+5bps) rising the most. Uncertainty around the timing and magnitude of Fed’s rate cuts in CY24 impacted investor sentiments. In UK, the jump was driven by pared demand. India’s 10Y yield also rose by 3bps, and is trading broadly stable today at 7.20%, as oil prices remain low.

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