Stocks Surge Following Robust Data as Markets Returns for H2

U.S. equities are on the rise to start the second half of the year with a quick dose of data before the U.S. returns to its 4th of July celebrations with an early close. A stronger than expected U.S. PMI report lifted equities. This followed a mixed session in Asia and gains in Europe, with oil continuing to progress to the upside to 3-week highs over $46 per barrel. In Asia, China’s CSI 300 sank 0.4% despite another PMI gain, while Japan’s N-225 finished just 0.11% higher after PM Abe’s LDP lost a regional election. Europe is smartly higher, with the DAX firmer and the French CAC up over 1%.

Eurozone jobless rate steady at 9.3% in May. Jobless rates have come down considerably and labor markets are improving across countries, although so far that hasn’t lifted wage growth significantly and high youth unemployment in countries such as Spain, Italy and Greece remains a key challenge for policy makers.

The UK June manufacturing PMI came in much weaker than expected, at 54.3 in the headline reading, down from 56.3 in May, which itself was revised lower from 56.7. The median forecast had been for a 56.4 outcome. The new export orders component ebbed to a five-month low of 52.6 from 53.2 in the prior month, which is disappointing given the health of international economies and the significantly more competitive level of sterling following the Brexit vote last year. The pound and UK yields dipped on the data, though markets will be looking to the services PMI report on Wednesday for a better indicator of where GDP is headed in Q2 and what implications it may have on BoE policy.

U.S. PMI Data was Stronger than Expected

U.S. June ISM manufacturing index rose 2.9 points to 57.8, much stronger than expected, after inching up 0.1 point to 54.9 in May. It was 52.8 a year ago. This is now the highest for the year as it was 57.7 in February, and is the best since 57.9 in August 2014. The employment component jumped to 57.2 from 53.5, though is still just off the 58.9 in March, which was the peak since mid 2011. New orders climbed to 63.5 from 59.5. New export orders rose to 59.5 from 57.5 (the same as in April and is the best since November 2013). Prices paid fell to 55.0 from 60.5 and is the lowest since November. It was as high as 70.5 in March.