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World Growth

September 1, 2010 – 5:17 pm

The big news out this morning is that China and Australia released economic news showing China’s PMI moved up to 51.7 and the GDP for Australia was up 1.2%; both numbers were stronger than expected. That good news was on top of yesterday’s GDP number for India that came in at a very strong 8.8% growth. That pushed futures on the Dow to above 100 this morning, indicating a strong open for the market.

Also out this morning was the ADP employment report that comes out every month a few days before the official report. It is a gauge of private sector jobs. It showed a fall of 10,000 jobs. The market did not react to that news but on Friday the reaction with the official report will be interesting.

The expectations for the U.S. PMI in August was 52.8 for manufacturing but the actual number out this morning was 56.3, much better than expected and
higher than last month. Construction spending for July was expected to fall .5% but actually fell 1%. No one cared this morning about construction spending.

The jobs report out on Friday will be very interesting both in the reaction by the stock market and showing the soft patch in the recovery. Jobs are a lagging indicator and though everyone focuses on it the stock market is looking at hints of a continued recovery and they are finding it, just not necessarily in the U.S. As a reminder, over 50% of the earnings of the S&P 500 come from overseas. That indicates to me how important world growth is while at the same time not ignoring the need for U.S. growth.

Good Trading
Steve Peasley

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