Normally, when you see data showing an expansion in US manufacturing it’s positive for markets -- maybe not bonds, of course. Yet last night, following the release of the ISM index, we got nothing. In fact stocks on Wall Street initially fell and ended the session flat, effectively. Crude prices even fell. Don’t forget that of all the manufacturing surveys out there, this is probably the only one that's any good. So when this survey says the US manufacturing sector accelerated in May, it matters.
Overall, the index rose 0.5 per cent to 55.4, showing a surge in production for the month and a solid pick-up in new orders. The problem is that the survey only showed this result after two revisions. When the survey results were initially reported the index showed a fall.
Stocks fell and at the low the S&P 500 was off 0.4 per cent. In the ensuing hours -- and only after analysts in the market investigated the report and found errors -- the index was revised up to 56, before being revised back down to 55.4.
It’s no wonder markets eventually just shrugged it off. Just think -- in 2011 when the market was obsessed about a US double dip, an error like that could have made someone a fortune. Anyway, the bottom line from recent data is that manufacturing in both the US and China -- their own PMI rising to a five month high in May -- is accelerating.
Equities had a mixed session around zero in the end. On Wall Street, the S&P 500 was up just 0.1 per cent (1924) and the Dow rose 26 points (16,743) -- both of those indexes rising to new record highs. The Nasdaq was off 0.1 per cent (4237). Over in Europe, the Dax was up 0.07 per cent, the CaC was 0.08 per cent weaker and the FTSE100 was 0.3 per cent higher.
Forex markets saw the euro weaken a bit, but only by 30 pips or so to $US1.3598. The British pound was little changed at $US1.6747, while the Australian dollar, having fallen sharply after yesterday’s building approvals numbers, only lost a few more pips from 4.30pm (AEST) to be at US92.48c. The US dollar pushed higher against the Japanese yen at ¥102.4.
Commodities were mixed with crude off 0.3 per cent on WTI ($102.4), despite the acceleration in US manufacturing. Brent was down 0.7 per cent ($108.8). In the metals space, copper rose 1.4 per cent, silver was up 0.3 per cent and gold fell 0.2 per cent.
Rates pushed higher for a change, the US 10-year Treasury yield up almost 3 bps to 2.527 per cent. The 5-year Treasury yield was then up over 4 bps 1.5916 per cent, while the 2-year yield is at 0.387 per cent. Aussie futures were off a tick on the 3s at 97.23, while the 10s were down 3 ticks to 96.305.
Elsewhere, in the US, construction work done rose by 0.2 per cent in April while over in Germany consumer prices fell 0.3 per cent in May to be 0.6 per cent higher annually.
Markets today: The SPI points to a modest gain for the All Ordinaries, something in the order of 0.2 per cent. Data wise there is some good flow on the domestic side. The Reserve Bank meeting is today and we get the decision at 2.30pm (AEST) -- no one expects the bank to move rates today. Prior to that, retail sales come at 11.30am (AEST) alongside the current account, net exports and the government finance numbers. The last two will feed into Wednesday’s GDP figures. Otherwise, keep an eye out for the Chinese manufacturing PMI at 11.45 (AEST). Tonight we see European inflation figures, factory orders and a speech from the Kansas City Fed President Esther George on the US economy.
Have a great day.