Having endured another disappointing session yesterday US markets look set to open higher, taking their cues from this morning’s rebound in European markets after a couple of days of fairly strong declines.
This is in spite of another disappointing Caixin China manufacturing PMI which came in at a 78 month low, which in turn is reinforcing concerns as to why, despite a number of policy easing moves, there appears to be no pickup in activity from the Chinese manufacturing sector.
German auto makers are also enjoying that rarefied experience of being in the green after recent heavy falls, with BMW, Daimler and Volkswagen (XETRA:VOWG) higher, though it is notable that French car makers are experiencing further falls today. Even mining stocks are showing a bit of strength after four days of heavy falls, as commodity prices also show a little bit of strength.
Whether todays rebound is anything other than a dead cat bounce only time will tell but for investors to blame this week’s uncertainty on last week’s Fed decision to hold rates is a bit tenuous. If anything this morning’s China data merely reinforces the decision to proceed with caution, at a time when the outlook for the Chinese economy is anything but clear, and equity markets remain racked with uncertainty.
Recent attempts by FOMC members to project clarity on last week’s Fed decision by insisting that a 2015 rate rise remains on the table has only served to reinforce a feeling of duality in the way investors perceive the next market move.
Will the Fed really raise rates if the recent stock market weakness continues into the autumn, and inflation continues to decline? Somehow I doubt it, yet Fed policymakers would have us believe that is the case.
The Dow Jones is expected to open 40 points higher at 16,370
The S&P500 is expected to open 5 points higher at 1,947.0
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