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01 February 2011

US Equities Rally on Better than Expected ISM

Written by dslmpartners
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Global equities were higher after strong economic data offset some of the market fears over Egypt, with positive spill over from positive earnings on Wall Street. Asian stocks rose for the first time in three days with the MSCI Asia Pacific up 0.5%. The Nikkei ended the day 0.3% higher, despite the losses in the dollar/yen. In Europe, stocks took their cue from Asian trading with the Euro Stoxx 600 up 0.8%, led by gains in materials after the solid European PMI prints. US equity moved higher as better than expected manufacturing data lifted the markets.

The ISM reported better than expected manufacturing data, which continues to remain very strong. The headline index reflect at 60.8 reading, much better than the 58.0 expected by economists. Additionally, the prices paid index, which is a gauge of inflation, came at 81.5, from in December 72.5. The S&P 500 broke out to the upside.

Manufacturing PMI reports for January generally came in better than expected and showed continued improvement in the global outlook. Of note, the UK PMI saw a particularly big jump to 62.0 from a revise 58.7 (was 58.3). Good data is helping the euro, as German unemployment fell more than expected while German and euro zone unemployment eased a bit in January. China PMI was one of the few to come in slightly lower than expected at 52.9 in January (down from 53.9) but it is still signaling that manufacturing is expanding there. RBA left rates unchanged at 4.75%, as expected. It noted that flood rebuilding is likely to add modestly to demand but will have little impact on inflation. Indeed, RBA said that inflation seen remaining in its 2-3% target range this year. RBA sounded a bit more optimistic on the global growth outlook vs. the previous meeting.