By Carlos Guillen
Equity markets are making a strong move to the upside as reflected by the Dow Jones Industrial Average, which is up over 110 points so far into today's trading session. While news from Syria is still at the center of attention, investors today took a look at data from China as well as employment trends from here at home and have been enthused into stock buying.
After rather mixed employment data on display this past Friday, in which the Labor Department reported that nonfarm payrolls increased by a slightly-less-than-expected 169,000 new jobs, with a large downward revision to July payrolls, and the unemployment rate fell to 7.3 percent in August, better than expected, but mainly because people dropped out of the labor force; today The Conference Board said its August employment trends index increased to 113.54 from an upwardly revised 112.80 in July, representing an increase of 4.5 percent from the year ago period. This is certainly a positive and is indicative that the employment backdrop is likely to continue to improve in the near term.
Also giving some encouragement to investors today was news from over the weekend that China's exports increased more than estimated in August and inflation stayed below the government's target. As it stands, Chinese overseas shipments rose 7.2 percent from a year earlier, which exceeded economists' 5.5 percent forecast. Moreover, consumer prices rose 2.6 percent, which leaves room for extra stimulus if needed. This is very important for world markets in general as demand from China is critical for economic growth in major economies including that of our own.
In all, stock markets are continuing to hold on to gains and, quite surprisingly, remain stable. Given that September is notorious for being the worse month of the year for the S&P 500 since the 1950's, it may be a bit premature to get overly excited about the positive trend so far this month. Of course, the situation in Syria and the start of debt ceiling debates pose are near term catalysts for volatility in the near term.
Asia Data Impresses
By David Urani
The markets in Asia had a huge day today and it comes on the back of some positive economic data that supports the possibility that economic activity is bottoming out over there. The Shanghai Composite was up 3.4% on the day and the Japanese Nikkei was up 2.5%
Case in point is Chinese trade data which showed export growth of 7.2% year over year, which was well above the expected 5.5% increase. Obviously China is a big export-driven economy so this is a number people like to look closely at. Imports also rose by 7%, leading to an increase in total trade by 7%. That comes alongside positive manufacturing data last week out of China. HSBC's manufacturing PMI number for China in August had hit a reading of 50.1, which means activity was barely growing (numbers below 50 indicate contraction), but it was a nice reversal from the 11-month low of 47.7 in July. In the meantime those better export figures out of China also indicate strength out of China's trading partners, namely Europe and the US.
Over in Japan the buzz is GDP which was reportedly up 3.8% for 2Q, not a bad result and in fact much better than the initial estimate of 2.6%. That was perhaps an endorsement of Prime Minister Abe's extreme government spending campaign. However, any gains on good news from Japan are likely to be limited given that all the aforementioned spending has really taken its toll on the budget deficit. Subsequently, Japan now has an eye on raising taxes to make up for the big debt they've spent themselves into as this kind of policy simply is not sustainable. Higher taxes are certainly one way to throw cold water on that economic growth.