European Manufacturers On A Tear On Weaker Euro

By: Frank Holmes | Mon, May 8, 2017
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At the start of the second quarter, the eurozone’s manufacturing sector grew at its fastest pace in six years, climbing from 56.2 in March to 56.7 in April and marking the eighth straight month of expansion. Of the eight eurozone countries that IHS Markit surveys, only Greece failed to show any improvement during the month.

Growth was spurred by new orders, output and job creation, and companies are benefiting from both the historically weak euro and the European Central Bank’s ongoing stimulus, including low interest rates. Factory jobs are currently seeing one of their strongest upticks in the survey’s 20-year history.

Ahead of France’s presidential election this past weekend—polls heavily favored the victor, 39-year-old Emmanuel Macron, over far-right candidate Marine Le Pen—the country showed impressive momentum, rising from 53.3 in March to 55.1 in April. New orders grew at their sharpest pace in six years. Meanwhile, the United Kingdom’s manufacturing sector continued to expand post-Brexit, rising to a three-year high of 57.3.

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Both the U.S. and China continued to expand at the start of the second quarter, though at a slightly slower pace than in March. U.S. manufacturing growth relaxed a little more than 2 percent, from 57.2 to 54.8, but it still remains at a high level in the six months following the presidential election. Chinese factories pumped the brakes in April, with growth slowing to a seven-month low.

Manufacturing on a global level continued to expand as well but, like the U.S. and China, at a slower pace. The index fell from 53 in March to 52.8 in April, with the one-month reading falling below its three-month moving average for the first time since April of last year.

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Like clockwork, copper and oil were off last week. As I’ve shown a number of times before, the PMI can be used as a forecast tool for commodities and natural resource prices.

Last Wednesday copper lost 3.5 percent, marking the largest single-day loss since September 2015. The red metal ended the week at $2.53 a pound. Oil tumbled nearly 5 percent on Thursday to close the trading day at $45.48, a level we haven’t seen since December. On Friday it finished above $46 a barrel.

By Frank Holmes via USfunds.com

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The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.


 

Frank Holmes

Author: Frank Holmes

Frank E. Holmes
Chief Executive Officer
Chief Investment Officer
U.S. Global Investors

Frank Holmes

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company's funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper's top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper's top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of "The Goldwatcher: Demystifying Gold Investing."

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron's, The Financial Times and other publications.


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