China PMI Cheers Stock Markets While PIGS Fly Tighter

Stock-Markets / Stock Markets 2010
Oct 01, 2010 - 08:39 AM

By: PaddyPowerTrader

US macro data sent the markets higher initially Thursday (GDP beat 1.7% v 1.6% cons; Chicago PMI 60.4 v 55.5 cons; weekly jobless data was also better), with the S&P500 breaking through the 1150 mark to new highs. However, the break did not last long as the futures desk’s month end flow was better to sell (the chatter from the US was that asset allocators were going to have to dump equities on the close given the outperformance of equities in September). The selling pressure eroded the majority of macro-led gains, leading to a finish in negative territory on the day.

European equity markets have opened higher this morning despite yesterday’s late day sell off and lower closes in the US overnight. Data out of China in the form of PMI manufacturing showed its strongest gain in 4-months and highlights the strength in the economy. It also confirms a positive outlook in particular for the mining sector e.g. Antofagasta, Rio Tinto and BHP Billiton. On the currency side the Euro is approaching the €1.37 level against the dollar. With an imminent announcement of further quantitative easing and issues in peripheral Europe being put on the back burner for now (with Irish, Greek and Portuguese yields continuing to tighten like bandits) the dollar will continue to remain weak.

Does Good Friday Follow Black Thursday ?

Yesterday marked a critical point in the future of the Irish banking system with a credible recapitalisation strategy being announced by the Minister of Finance. The plan, while being more severe than expected, was broadly welcomed by the markets and Irish spreads – both sovereign and financials – rallied over the course of the day. Any suggestion that Ireland may have to call on the EFSF or the IMF has been continually denied in recent weeks by a number of Irish and international bodies and confirmation of this yesterday, from IMF chief Dominique Strauss-Kahn and CEO of the EFSF Klaus Regling, should offer comfort in this regard.

Focus is likely to turn now towards December’s Budget with the Minister of Finance reiterating that Ireland is “committedâ€