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Global PMIs & U.S. ISM

01/04/2012

The first trading day of the year in the U.S. witnessed a strong bid for risk assets buoyed by better-than-expected European PMIs and U.S. ISM Manufacturing. Despite these favorable reports, however, I expect more information needs to be digested in these early days of January before abandoning defensive positions.
 
Corporate earnings are at the top of the list, as well as Friday’s unemployment report. Oil prices continue to trade dangerously high and could quickly evolve into a market headwind.  Finally, absent from yesterday’s risk asset strength was a significant rise in Treasury yields. The 10-year U.S Treasury still cannot elevate above 2%. A rise in Treasury yields is my number one indicator as to when we should increase risk exposure.
 
Technicians and I will be encouraged by further S&P 500® Index strength above the October 27 high at 1292.66 (Figure 1.1).
 
Until then – Be long defensive assets.
 
Figure 1.1 S&P 500 Index with October 27, 2011 high annotated

Source: Bloomberg
 
Now let’s take a look at the data from yesterday . . . .
 
U.S. ISM rises to 53.9 from 52.7 last month

Source: Bloomberg
 
U.S. ISM New Orders rises to 57.6 from 56.7 last month

Source: Bloomberg
 
U.S. ISM Employment Index rises to 55.1 from 51.8 last month

Source: Bloomberg
 
Germany’s PMI Manufacturing Index rises to 48.4 from 47.9 last month

Source: Bloomberg
 
Italy’s PMI Manufacturing Index rises to 44.3 from 44.0 last month

Source: Bloomberg
 
France’s PMI Manufacturing Index rises to 48.9 from 47.3 last month

Source: Bloomberg
 
United Kingdom’s PMI Manufacturing Index rises to 49.6 from 47.7 last month

Source: Bloomberg

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