Markets Rebound

The markets are taking a much-needed break from selling on the strength of manufacturing figures from around the globe.   Led by Chinese growth in PMI figures which came in at a 7-month high, the market has shrugged off recent Euro debt crisis concerns.

There were also good numbers from the UK and various regions in the Euro zone, showing signs of economic life.  US ISM Manufacturing figures are due out later this morning.  However, one day of decent data does not a trend make.  The looming debt crisis in the euro zone is still the major detriment to global economic health.
Overnight in Australia, GDP figures came in lower than expected but perhaps are indicative of the intended effects of the RBA rate hikes, that is, to keep inflation in check and to keep the Australian economy from over-heating.
So today is a risk-on day, however the overall risk themes in the market have not abated to the point where they can be discounted—yet.
In the forex market:
Aussie (AUD):   The Aussie is higher despite reporting lower than expected GDP figures as global risk appetite has increased.  GDP grew at .2% vs. an expected .4% for the 3rd quarter, pushing the YoY figure down to 2.7% vs. an expectation of 3.4%.  (Click chart to enlarge)
Kiwi (NZD):   The Kiwi is higher on risk appetite and the Chinese economic expansion data, which is a positive for NZ exports.  However, the Korean conflict has not gone away so there still are some tensions in the Pac Rim.
Loonie (CAD):   The Loonie is the best performer this morning as demand for commodity currencies has increased despite yesterday’s disappointing GDP report.  Oil is back up to 85 and change, and Canada’s geography insulates it from the Korean conflict, unlike the Aussie and Kiwi.
Euro (EUR):  The Euro is catching a break today from selling due to the debt crisis. German retail sales figures came in close to double the expectation for last month, though overall PMI figures were slightly lower for the Euro zone.  (Click chart to enlarge)
Pound (GBP):   The Pound is mixed this morning as is expected under a “normal” risk-taking scenario.  While manufacturing growth rose at the fastest pace in nearly 16 years, home prices have fallen to a 9-month low.  PMI figures came in at 58, vs. an expected reading of 54.7.
Dollar (USD):   The Dollar is weaker across the board as some of the recent safe-haven plays are being un-wound.  Better than expected ADP employment data has contributed to risk appetite, two days ahead of Friday’s NFP report.
Yen (JPY):  The Yen is lower against all as investors are dipping their toes back in the risk pool.  There’s no significant news out of Japan for the rest of the week so expect the Yen to continue to move on risk themes.
This schizophrenic market has longer-term investors shaking their heads but for short-term traders this is nirvana.  One day the world is seemingly going to end, and the next day everything is champagne and roses.
But that’s how markets work.  They sometimes have a short-term amnesia which can confuse and distort the overall picture.  Let’s not forget that tensions are still high in Korea, or that Portugal and Spain are a few hundred basis points away from being forced into taking a bailout.
While better than expected data is good news, it may not be enough to change overall sentiment or the economic problems that plague us.  But I am not here to be “Debbie Downer” today, as I am content to party on with market.  However, I am hanging near the exit and am out at the first sign that the party may be over.

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