Global stocks headed higher once again with European benchmark indices resuming the relief rally after a momentary pause yesterday saw investors take short term profits. European stocks gained some relief after PMI data released this morning came in better than expected. Both the preliminary manufacturing and services PMI for August managed to exceed consensus estimates, coming in at 52.0 and 56.4, against expectations of 51.5 and 55.5 respectively. The PMI figures for the eurozone however, was in stark contrast to Germany’s standalone figure with both readings missing expectations, coming in at 50.8 and 53.5 in August respectively. The softer data sent eurozone bond yields lower as investors increasing held the view that the ECB would take action to avoid further deflationary pressures. The euro managed to receive some temporary reprieve from further declines against the dollar, recovering from an eleven month low towards 1.3278 earlier on in the day before firming up towards the end of the European trading session around 1.2368.
Investors were still absorbing the Fed minutes which saw policymakers begin to adopt a more hawkish outlook that previously. The sanguine mood carried over to the US trading session with both the S&P 500 and DJIA firmly higher on positive data. Encouraging macro releases today fuelled speculation that policymakers would look to increase the base rate sooner than previously anticipated after initial jobless claims fell 14,000 w/w to 298K, signalling strong improvements in the labour market. Continuing claims in the US fell to their lowest level since 2007 while the preliminary manufacturing PMI reading for August surged higher to 58.0 from 55.8 the previous month. The rally may be set to continue right until the end of the week as investors remain bullish ahead of further details from central bankers regarding market conditions and forward guidance at the three day Jackson Hole symposium, which starts today.