On top of the usual European centric worries about Spain and
Greece, today's trading action will likely also reflect the outlook
downgrade for Germany by a rating agency. There is nothing
imminent in the outlook downgrade, but it is nevertheless a
reminder that the region's fiscal woes have consequences for its
strongest economy as well. Beyond Europe, we have a relatively
reassuring read this morning on China's manufacturing sector,
indicating that the country's factory sector may not be in a free
On the earnings front, results from
), two key bellwethers for the global economy, confirm the trend
that we have seen repeatedly this earnings season - that the growth
picture is cloudy, prompting companies to be cautious if not
altogether negative in their guidance.
), which reports after the close today, is believed to be immune
from these earthly concerns; or is it? We will sure find out later
today, but the company is no doubt in a league of its own.
The China news is definitely on the reassuring side, with the
HSBC China Manufacturing Manager's Index for July coming in at
49.5, up from June's 48.2 reading. Just like the ISM readings in
the U.S., below-50 readings indicate contraction in the sector, but
the improvement from the prior month indicates that the outlook for
the country's factory sector may be on the mend. This is the
highest level for this closely watched index in five months and
could be indicative that the country's monetary and fiscal easing
measures are starting to have an impact.
Some caution, however, is warranted. First, this the
'preliminary' version of the monthly HSBC PMI, reflecting less than
complete response rates from survey participants and can get
revised in the 'final' version. Second, despite the improvement the
measure still shows the country's factory sector in contractionary
territory for the ninth straight month. These caveats aside, the
measure could be indicative of the long debated 'soft landing'
scenario if sustained in the coming days.
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