Monday, June 2, 2014
Stocks made strong gains in May and appear on track to start June
on a positive note as well, despite the backdrop of mixed global
data, with weak readings out of Europe and positive Chinese
numbers. The U.S. manufacturing ISM report coming out a little
later today will be key to how the markets perform. The expectation
is for the ISM index to improve nicely from the April level.
Improved Chinese factory sector data is indicating that the
country's growth is improving. The country's official manufacturing
purchasing managers survey for May over the weekend came in better
than expected at 50.8 vs. 50.4 in April, the highest reading this
year. The gains were fairly widespread, with the sub-components for
production and new orders making steady gains. The inventories
sub-component fell, indicating that they will need to get
replenished in the coming days while the exports sub-component also
made strong gains even though it remained below the 50 mark.
Questions about China's growth have been a lingering concern for
the market for quite some time amid renewed signs of weakness in
the country's economy this year. This prompted the Chinese
authorities to come out with a mini-stimulus package a few months
back that may be starting to have an effect already. Competing
measures of Chinese PMI, one by
) and another by the research firm Markit, have started showing
similar improvement, though the final HSBC measure for May hasn't
come out yet.
Beyond China, the U.S. manufacturing ISM reading is expected to
improve to 55.5 from April's 54.9 reading. The Euro-zone PMI data
from research firm Markit this morning showed further loss of
momentum for the currency region. The French weakness wasn't
unexpected, but the sharp slowdown in Germany's factory sector came
in as a big surprise. This could prove to be the final straw that
pushes the European Central Bank to come out with its long-promised
easing policy at this week's meeting.
Director of Research
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