Shares and core euro zone bonds have secured minor gains today as fresh concerns about the Federal Reserve’s policy stance to some extent undermined the election triumph for Angela Merkel in Germany and some upbeat euro zone data.
Merkel’s resounding win in Sunday’s German elections, seen as a strong vote of support for her efforts in keeping the euro together, was followed by forward-looking euro zone PMI data showing the bloc’s economy continuing to pick up pace. Markit’s September Flash Composite Purchasing Managers’ Index jumped to 52.1 from last month’s 51.5, its highest since June 2011 and beating expectations for 51.9. New orders were at their fastest pace in over two years.
European stocks hit a five-year high last week and the chairman and senior market analyst for Saxo Bank capital markets indicated that Merkel’s election win was “a ringing endorsement” to ensure the euro survives. Merkel’s victory gave the euro only the briefest of lifts, however, as she will still need a new coalition partner to rule. Having initially gained a quarter of a U.S. cent to $1.3555, it quickly faded to $1.3516. Against the yen, the common currency eased to 133.67, from an early 134.56 while against sterling it inched down to 1.1867 per pound. That left the dollar index little changed at 80.382, not far from a seven-month trough of 80.060 plumbed last week.
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan had dipped 0.1 percent. U.S. futures pointed to a slightly firmer open on Wall Street. Some Asian markets had started the week with significant gains, thanks to a survey that showed a promising pick up in Chinese export orders, another sign of stabilisation in the world’s second biggest economy. A preliminary HSBC Purchasing Managers’ Index China climbed to 51.2 in September, from August’s 50.1, with 10 out of 11 sub-indices up in the month. New export orders jumped to a 10-month peak of 50.8, the first time in six months that exports have grown. Readings on manufacturing across Europe are due later on Monday.
Shares in Shanghai gained 1.0 percent and Taiwan’s main index was up 0.9 percent. Australian shares were down 0.5 percent and Japanese markets were closed for a holiday. The upbeat China survey sent the Australian dollar a quarter of a U.S. cent higher to $0.9422. China alone takes around one-third of all Australia’s exports, chiefly commodities such as iron ore.
The Dow Jones industrial average lost 1.2 percent on Friday, while the S&P 500 Index eased 0.7 percent. Some of Friday’s dip was attributed to comments from St. Louis Federal Reserve Bank President James Bullard who said that a start to winding down the stimulus program was possible in October, depending on coming economic data. Even the thought the Fed might start tapering in October jolted commodity markets, leaving gold down at $1,321.81 an ounce, from Thursday’s peak of $1,374.54. Copper futures were off 1.2 percent. U.S. crude remains also flat at $104.79.
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