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Excellent Chicago PMI Reading

06/30/2011
The Chicago PMI Index was released at 9:45 a.m. ET today (June 30). It was anticipated that recent weakness in manufacturing would further deteriorate the Index from last month's 56.6 to an expected 54. However, a surprisingly strong 61.1 exceeded expectations and is lifting risky asset prices. Looking inside the report, there is a correlation between the strong number and Japan's business recovery, in particular, the auto supply chain coming back online. The "new orders" component surged from 53.5 to 61.2. Up next will be the ISM Manufacturing Index on Friday, July 1. Expectations are low for this report, with this month's consensus estimate at 51.8 following last month's 53.5.
 
Overall, this week's price action suggests a mild rotation out of U.S. Treasuries back into riskier assets. Supporting the rotation is positive news from Greece, Nike, the IDC Technology report, and evidence that Japan is coming back online.
 
The market has stabilized its corrective decline and is showing concrete evidence that global growth is in the midst of a slowdown, not a meltdown. The pause that will refresh. . .
        
 
CHICAGO PMI, 6/30/05-6/30/11 

Source: Bloomberg
 
 
U.S. ISM MANUFACTURING, 6/30/05-5/31/11

Source: Bloomberg
 
 
U.S. 10-YEAR TREASURY, 3/1/11-6/30/11

Source: Bloomberg

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