Spreadex Market Analysis: Steady Rise In US Futures

AM Analysis – “Markets spooked by Bernanke’s comments” – Max Cohen
Despite maintaining unprecedented monthly bond purchases at $85 billion, markets seem to have been spooked by Bernanke’s comments that the U.S economy is still going from strength to strength regardless of the partial government shutdown. Strong evidence for this is the fact that the MSCI Asia Pacific index slid 0.3 percent despite manufacturing picking up across the region. From China to South Korea, official PMI’s rose more than estimated to an 18-month high, suggesting that we are about to enter a stage of consolidation.

U.S. data yesterday showed the biggest jump in a gauge of business activity in more than three decades and a drop in jobless claims, highlighting the strength in the U.S economy. Additionally, a report today is projected to show American factory output expanded. In a similar fashion to the Asian markets, U.S headline indices are being weighed down by Fed tapering concerns. The S&P 500 slipped 0.4 percent yesterday, breaking a run that has seen the index climb 4.46 percent this month.

The MSCI Asia Pacific Index’s October advance pushed its price-earnings ratio to 13.7 times estimated earnings from 12.7 at the end of August, compared with 15.9 for the Standard & Poor’s 500 Index. Some 51 percent of the 300 companies in the Asia-Pacific measure that reported results this quarter and for which estimates are available have missed analyst estimates for profit.

PM Analysis – “Steady rise in US futures today” – Alex Conroy
Yesterday appeared to find the bottom of negative investor sentiment in US markets with a steady rise in US futures today. Bulls appeared to be resurgent ahead of data this afternoon; Manufacturing PMI came in better than expected at 51.1 and the Dow opened up, better than forecast ISM manufacturing PMI continues to further bolster the US markets. The dollar has been strengthening this afternoon with the cable moving back below the 1.6 mark with the end to QE seen on the horizon. After the immediate volatility following the FOMC policy meeting and panic that tapering could occur towards the end of the year, sentiment seems to be that the surge of US markets has weathered a government shutdown and previous volatility over tapering and that it’s safe to jump back into equities.

The UK’s manufacturing PMI came in slightly worse than expected today but still showed solid growth, investors are interpreting this as a sign that the recovery might be gaining a broader base and has led to a positive day currently 22 points up. There is concern however that growth has been falsely inflated by soaring house prices and consumer demand with manufacturing PMI still 9% lower than it was pre-crisis. Never the less this is still seen as an encouraging sign.

[The original articles by Spreadex can be found here.]

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