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China & Germany provide FTSE distraction from Fed debate
by Chris Marshall on Aug 22, 2013 at 09:26
Evidence of growth in two of the world’s most important economies, world trade nexus China and eurozone engine Germany, helped end a three-day losing streak on Britain’s FTSE 100 and other European markets.
Key ‘PMI’ survey readings allowed investors to at least temporarily shelve the doubts over Fed stimulus that have hit markets recently, and instead focus on some economic data.
The FTSE 100 rose 1% to 6,452, while benchmark indices in Germany and France both rose more than 1%.
Economists raised their growth expectations for China after the HSBC ‘flash’ manufacturing PMI jumped to 50.1 in August from 47.7 in July, breaching the 50 mark that indicates expansion.
‘As pessimism escalating in some emerging economies (with current account deficit and low FX reserves) in fear of capital outflow and runs on their currencies, today’s HSBC flash PMI reading should be quite positive to market sentiments,’ commented Lu Ting, an economist at Bank of America Merrill Lynch, in relation to growing concerns over the impact of the withdrawal of US stimulus on emerging markets.
European PMI readings were also stronger than expected. Germany’s flash composite index from data provider Markit increased to 53.4 in August, from 52.1 in July to reach its highest level since January. Europe’s biggest economy is ‘powering ahead’ said ING Bank’s Carsten Brzeski.
Germany’s strong performance helped the overall eurozone index rise to a 26 month high of 51.7 in August, up from 50.5, adding to signs that the currency bloc is on the mend, albeit slowly.
The data acted as a salve to markets after last night’s update from the Federal Reserve’s FOMC decision-making committee provided little clarity for investors trying to second-guess the fate of the central bank’s stimulus scheme. The minutes of the FOMC’s latest meeting provided little to prevent a continuation of the markets’ 'taper caper tantrum', as Marc Ostwald at Monument Securities put it. Maybe tapering will start in September, maybe not.
Of London shares, miners gained after the China data, led by Glencore Xstrata, Vedanta and Antofagasta, all up around 2%.
IMI topped the index, up 6% to £14.92, after the engineering group reported a small rise in profits for the first half of the year from £168 million to £170 million, and said it expects trading conditions to improve in the second half of 2013.
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on Dec 10, 2013 at 12:57