We started the new week out a bit weak in S&P futures last night (ES)...
ES was a bit negative going in to Friday's close, it opened a bit weak and lost ground. Overnight, China came out with their own PMI data (HSBC's Chinese Flash PMI comes out first), and the data missed. Last month China's PMI manufacturing was under 50 and signaling contraction, consensus for today's was 50.1, but came in at 49.8 which is the second month of contraction per the Chinese data, the HSBC data is worse as you might expect. There was modest improvement vs. last month's print and the sub indices saw modest improvement except for 1, the employment index which is now in its fifth month of decline with input prices seeing their second consecutive month of higher prices. Typically the Chinese answer to bad data like this would be some kind of PBoC easing action, but inflation is a concern and loose monetary policy will only make that worse, so China itself is now admitting to 2 consecutive months of contraction, HSBC's Chinese PMI has been in consecutive decline since about November of last year; this didn't help early sentiment in futures. *It should be noted that the Shanghai Composite is closed for the Chinese "Golden Week" so we didn't exactly see reaction in the Chinese market to their PMI data.
However, at the European open, Italy, France and Germany saw slightly better PMI readings as well as the Euro-zone as a whole, except the UK. Euro-zone PMI came in last month at 46, consensus was for the same this month, it beat by...get this, .1 at 46.1 and that signaled a 100 pip move higher in the EUR/USD. UK PMI came in at 48.4, down from 49.5 on consensus of 49. The .1% beat in the Euro-zone PMI is hitting headlines as the strongest PMI in 6 months, but as always the devil is in the details. Euro-zone unemployment hit a new record at 11.4% per the PMI data. New orders fell from 43.7 to 43.5 and French PMI came in at 42.7 which is the lowest in 3.5 years, however, believe it or not, this new low was a beat of consensus with Spain, Italy and Germany also beating consensus in most cases by .1%.
The Euro's reaction.
ES going in to the North American open until present.
At 10 a.m. the market jumped up in the US as the ISM manufacturing index beat...
DIA 1 min.
Released On 10/1/2012 10:00:00 AM For Sep, 2012
| Prior | Consensus | Consensus Range | Actual |
| ISM Mfg Index - Level | 49.6 | 49.7 | 48.0 to 50.6 | 51.5 |
Strangely, the ISM report is bouncing back following three months of contraction going back to June, but not for September with the index at a better-than-expected 51.5.
Friday Chicago PMI saw the most deterioration in years, today the ISM beats even the highest consensus estimate. The sub-indicies were even very positive in today's ISM, New Orders, Prices, and Employment, all of which posted numbers solidly in the 50+ range. Why ISM is so different from every other manufacturing survey is anyone's guess, it seems way out of place.
Meanwhile Goldman Sachs lowers their Q3 GDP for the second time in as many days!?!?
European stocks jumped on the US ISM, european Credit as much less excited.
In fact the same can be said here in the US as High Yield Credit wasn't nearly as excited as US equities.
The green arrow is where High Yield Corp. Credit closed Friday so it has been in the red all day and didn't hold on to the post ISM read bounce very long at all before diverging to the downside from the SPX.
Longer term the two have been moving together, but today's move in the market was not mirrored (thus far) by credit.
Even Junk credit had the same negative divergence from the SPX.
Commodities also strangely diverged lower.
As did yields intraday
And longer term like High Yield Corp. Credit, Yields which have been tracking the SPX fairly well, weren't impressed at all on today's early data.
With so many horrible multi-year lows in manufacturing data, perhaps the market doesn't trust this pre-election ISM read that is so wildly out of whack with manufacturing data released just a day ago on Friday.
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