Financial markets slipped on concerns over the election in Italy. Exit polls suggested that a hang parliament would be formed amid the neck to neck race between the centre left party and Silvio Berlusconi's centre right coalition. In China, HSBC's flash manufacturing PMI was disappointing but the results were likely affected by Lunar new Year holiday. The US Fed Chairman Bernanke will begin his semi-annual testimony before Congress. Ahead of the meeting, Dennis Lockhart, the Atlanta Fed president stated that the US economic growth could exceed expectations this year but ongoing monetary stimulus is needed for sustainable recovery in the job market. Wall Street declined with the DJIA and the S&P 500 indices losing -1.55% and -1.83% respectively. In the commodity sector, the front-month contract for WTI crude oil initially slipped to an 8-week low of 92.07 before rebounding to 93.11 at close. The Brent crude contract also recovered after dipping lower earlier in the day. Gold price rose on bargain hunting with the benchmark Comex contract adding +0.88%.
Italy’s election sparked fresh fear for the euro as exit polls showed that a hung parliament would likely be formed. Accordign to Reuters, the center-left would have a solid majority in the lower house in terms of votes. However, it would not be able to pass bill without the Senate. Moreover, the Italian Centre for Electoral Studies estimated that Bersani's coalition would take 121 seats to, Berlusconi 117, Grillo 54 and Monti’s centrist coalition 22. No party or likely alliance with the 158 seats needed to form a Senate majority.
In China, HSBC's flash manufacturing PMI dropped to 50.4 in February, compared with consensus of 52.2 and down from 52.3 in January. The sub-indices of new orders and output fell -2.5 points and -2.2points respectively while the new export orders index slipped -0.7 points to 49.8. Yet, it should be cautioned that the results were subject to seasonal adjustment due to the Lunar New Year holiday.
On the dataflow, the US S&P/Case-Shilller Composite-20 probably gained +6.7% y/y in December from +5.5% a month ago. House price index might have added +0.6% m/m in December, same level as November. Meanwhile, consumer confidence probably increased +1.2 points to 59.8 in February while new home sales might have increased to 385K in January from 369K in the prior month. The Fed Chairman Ben Bernanke will testify at the Senate Banking Committee today.
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