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Strong PMI Readings Buoy Equity Markets

By:
David Becker

European stock markets are moving higher, with Eurozone markets outperforming after a strong round of PMI readings. U.S. stock futures are also up,

Asian Markets Quite Lackluster on the Day

European stock markets are moving higher, with Eurozone markets outperforming after a strong round of PMI readings. U.S. stock futures are also up, following on from gains on most Asian markets. Oil prices are up from earlier lows, but still down on the day, with WTI trading at USD 50.55 per barrel. In the Eurozone peripheral markets in particular benefited from the strong PMI numbers, speculation of an extension of the ECB’s QE program beyond March next year and the confirmation of Portugal’s investment grade rating by DBRS, which calmed Eurozone break-up fears. AT&T agreed to purchase media and cable giant Time Warner.

Bund and Gilt futures are higher on the day, but the Bund contract is off highs, after the better than expected PMI readings, which revived tapering speculation. In the cash market the 10-year Bund yield is down -1.0 basis points at -0.007%, with Eurozone spreads narrowing led by Portugal, after DBRS confirmed the country’s investment grade sovereign debt rating, although the Portuguese cash yield is already up from earlier lows again and now down -5 basis points on the day.

German PMIs came in better than expected, and French readings mixed. The German manufacturing PMI jumped to 55.1 from 54.3 in the previous month, and the rebound in the services reading was even more impressive, with a jump to 54.1 from 50.9 in the previous month. In France meanwhile the manufacturing PMI lifted to 51.3 from 49.7, but the services reading fell back to 52.1 from 53.3. Still, even the latter is firmly in expansion territory and the stronger than expected rebound in Germany in particular underpins hopes for an upside surprise in the overall Eurozone number, that will add to the arguments of the hawks at the council, who will be cautious of expanding the still very expansionary stimulus even more.

UK CBI industrial trends weaker than forecast, tumbling to a -17 headline in total orders in October after a -5 reading in September. The median had been for an unchanged -5 outcome. Export orders rose to a -6 reading, up from -10 in September, while selling prices rose to +8 from +5 and expectations fell to a +13 reading from +22 in the month prior. The CBI also reported quarterly confidence readings for Q4, which mostly improved notably, with optimism up to -8 from -47, for instance, but this was comparing to July when sentiment was at a low following the late-June Brexit vote.

AT&T agreed to purchase the cable and content giant Time Warner for $85.4 billion, which will face heavy scrutiny as the Justice Department will have to determine whether such as merger will increase the price of content. Despite the likelihood that many customers will experience some price conflicts, experts see the deal similar to the acquisition by Comcast of NBCUniversal, which went through in 2011 after 13 months of review.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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