More Disappointing US Data Dampens Recovery Hopes

Yesterday, more soft data out of the US disappointed investors, and the markets finally get a chance to react to the weak Chinese PMI data as the Chinese markets reopened.

The Fed concluded its two day policy meeting yesterday with a commitment to pursuing its monthly $85 billion asset buying programme. They also commented that they would be able to increase or decrease this amount as required.

Asian stock markets were broadly down during the late Asian session today in response to the Chinese PMI. Investors move away from risky assets like the commodities. One day after the PMI data, China’s purchasing managers data also dropped to 50.4 from 50.5 in March. The USD pushed away from the target 100 JPY level, pressurizing the Japanese export market.

Some softer than expected private sector employment and industrial production manufacturing data was released in the U.S. This caused the stocks to tumble yesterday, as investors were unmoved by the Fed’s comments. ADP released nonfarm payrolls which although showed a gain in April of 119,000, this came under expected number of 150,000. This suggests the creation of less jobs and a lower workforce. The number compares to March’s increase to 131,000. Investors see these figures as a taster to the monthly employment release which is due out on Friday. The Institute for Supply Managements factory index fell to 50.7 in April from 51.3 in the previous month.

As discussed over the last few days it’s widely expected that we will see the European Central Bank making interest rate cuts later in the day, prompted by high unemployment and low inflation. The rate is currently at an all-time low of 0.75 per cent and would perhaps go down to 0.5 per cent as well as the implementation of new austerity measures.