Promising US macro data overshadow labour market concerns

Tuesday, August 26, 2014

Global markets extended gains on a combination of bullish US data and expectations of looser ECB policy saw stock indices on both sides of the Atlantic edge higher throughout the day. Continental European stocks faltered slightly at the open but managed to rally higher towards the afternoon while London’s blue chip index posted steady gains from the open as trading resumed after the long weekend. Over on Wall Street, both the S&P 500 and DJIA were supported higher with the former eyeing a fresh record close above 2,000 while the latter eyed the record levels seen in July.

The risk on mood was supported by stronger than anticipated data coming out of the US today with durable goods orders, consumer confidence and the Richmond Fed manufacturing index all exceeding estimates. After a quiet start to the European trading session as investors continued to analyse comments made by Draghi at the previous week’s summit in Jackson Hole the release of durable goods orders for July, which increased a massive 22.6% m/m against expectations of an 8.0% increase, buoyed markets higher with the S&P reaching a key milestone.

The positive durable goods data was quickly followed up by an improving consumer confidence index which increased to 92.4 in August, against expectations of a slight slip to 89.0 from the previous month. Rounding off the bullish set of data releases was the Richmond Fed manufacturing index which rallied to 12.0 against expectations of a 6.0 reading. The encouraging US macro data managed to brush aside (for now) concerns raised by Yellen regarding labour market uncertainty and inflationary pressures which would lead to an eventual rate rise. The euro slipped to a fresh low, reaching levels against the dollar seen almost a year ago as it remained underpinned below 1.3200 throughout the afternoon. The single currency has lost 5.8% against the dollar since its year to date peak in early May but with Mario Draghi hinting at the possibility of further policy action investors will be anticipating the September 4th ECB policy meeting for further insight. 

US durable goods orders rebound in July

DGNOCHNG Index US Durable Goods 2014 08 26 15 32 11

EUR drops towards 1.3200 against the dollar

EUR Curncy Euro Spot 2014 08 26 15 43 03

Topics: USD, ECB, Economic Data, EUR
More from: Kash Kamal