By Carlos Guillen
Equity markets are on a decline for third consecutive trading session as investors have not quite recovered from Fed official comments of tapering during the next month and from debt ceiling risks.
The equity markets had reached record highs last Wednesday after the Federal Open Market Committee kept its bond purchases unchanged. However, this past Friday, stocks took a hit after Fed Bank of St. Louis President James Bullard said the central bank could opt to cut its $85 billion in monthly bond purchases as soon as next month. And today, in a statement to business leaders in New York, Fed Bank of Atlanta President Dennis Lockhart said the economy is losing some of its steam. Adding fuel to the fire are the discussions going on in Washington related to the budget talks and the debt ceiling. This ongoing cyclical fear of a government shutdown is once again serving to spook investors, just as it did last year.
Over in Europe, German Chancellor Angela Merkel won re-election by the largest amount in more than 20 years on Sunday, a clear positive for markets. However, manufacturing PMI data from the regions was not very encouraging. PMI readings for the euro zone (51.1), Germany (51.3), and France (49.5) all declined from the prior month's level, with France in contraction mode.
More encouraging was that an initial gauge of a Chinese purchasing managers' index of manufacturing activity put together by HSBC Holdings and Markit Economics rose to 51.2 this month from 50.9 in August, marking a six-month high.
And here at home, economic data had an index of national activity turning positive in August and a preliminary reading on manufacturing slipping but consistent with a modest improvement in manufacturing conditions; more on this below.
World Manufacturing Still on Track
By David Urani
The economic news of the day may be that from China, where HSBC's preliminary September manufacturing PMI index rose for a second month, from a reading of 50.1 to 51.2; the consensus was 50.9. Not only has Chinese manufacturing reportedly pushed back into growth mode (readings above 50 indicate growth) but this was the biggest 2-month increase in the index in four years. That takes the index to its best level in six months.
Likewise, the Shanghai Composite was up 1.3% on the day in the Chinese markets.
We were also given Markit's initial reading on US manufacturing, with the PMI index softening a little bit to 52.8 from 53.1. New orders were at a four month low and employment was at a 3-month low. Nevertheless, the index remains in growth and the decline was modest. As far as Markit's US PMI index goes, we're still a little unsure what to think of it given that it's a relatively new data set that started in the middle of last year. It doesn't carry the same weight as the widely-followed ISM manufacturing index although it does come out earlier perhaps to give one a taste of what's to come.