Apologies for the brevity today but I seem to have some computer nasties jumping my cursor around and cutting out the internet.
Recap
I am going to spend a little time celebrating the improved manufacturing PMI readings we saw across Europe and the US last night because I hope that these translate to more employment for the so many unemployed across Europe and the US. But the reality is that even though the data was better than expected it was a long way from great and the weaker PMI’s in South Korea and China are signalling that things aren’t that rosy which combined with the improvement in the Japanese Tankan survey shows the impact that Abenomics is having on its neighbours.
Markit and or HSBC Manufacturing PMI was higher than last month in Spain (50), Italy (49.1), France (48.4), EU (48.8), UK (52.5) and the US (51.9). It was the same in Brazil (50.4) and lower in South Korea (49.4 from 51.1!), China ( HSBC, 50.1 NBS which was unchanged) AND unsurprisingly but might need a drum roll GERMANY which fell to 48.6 from 49.4.
So all in all you’d have to say mixed at best.
Stocks caught a bid
For whatever reason, and I think it was probably just relief that things didn’t get materially worse stocks rose modestly but when I look at my S&P 500 chart, the biggish range with a higher high than Friday as well as a lower range before a middlish finish it seems clear there is still plenty of indecision around.
At the close the Dow was up 0.4% at 59.8, the Nasdaq rose 0.8% and the S&P 500 was 0.5% higher at 1614. In Germany the DAX rose 0.31%, the FTSE up 1.5% and the CAC up 0.76%.
USD weaker against AUD and euro but up against the yen
The Aussie liked the generally more positive tone in markets overnight and is back up at 0.9230/40 this morning more than 130 points off yesterday morning’s low. The four hourlies and the dailies suggest that there are further legs to this move but I guess it might hinge on what the RBA says and does today.
I think they should cut given the difficult transition that is ocurring as the mining boom fades and the domestic economy is not yet ready to fill the void created by the boom. I think they should cut not so that we can get more borrowing and higher house prices but because if we can further reduce the net repayment necessary for borrowers they might start spending some of the extra money in cafes, restaurants and local stores.
We’ll know at 2.30 today and 0.9330/40 seems to be the pivotal level for resistance and or a break higher.
The euro is at 1.3060 this morning needing to break 1.3140/50 to kick on and with support below 1.30. Sterling is largely becalmed and USDJPY is only 30 odd points from the 99.98 target but might have a little retracement ahead today before kicking on
Data
Today is RBA day and the chances of a rate cut are probably low at present however like last month I think they should drop again. PPI is out in Europe and ISM New York and Factory orders and vehicle sales are out in the US.
Twitter: Greg McKenna