Better Manufacturing Economic Data Boosts Equity Markets

By: Lloyds_TSB

Better-than-expected manufacturing data helped to restore the upward momentum in global equity markets yesterday, while at the same time putting the US dollar under renewed downward pressure against the higher yielders. The US ISM manufacturing PMI jumped from 52.6 in September to 55.7 in October – its highest since April 2006. The improvement was led by a sharp rise in the survey’s employment index, from 46.2 to 53.1, raising an upside risk for Friday’s October nonfarm payroll report (see chart).

Similarly, in the UK, the CIPS manufacturing PMI rose 4.2 points, to 53.7 – only the second time in the past eighteen months the index has been above the 50 level consistent with an expansion in manufacturing activity. The strong increases in both the UK and US manufacturing PMIs appear to have been motivated, in part, by restocking, after the substantial inventory liquidations earlier this year. The competitive boost afforded by the relative weakness of the US dollar and the UK pound

Today, the data calendar is relatively thin, with only the UK construction PMI and US factory orders reports likely to attract attention. We expect the UK construction PMI to have edged a little higher, but to have remained below the key 50 level last month. US factory orders are forecast to have rebounded by around 1% in September, after dropping 0.8% in August. Elsewhere, in the euro area, the focus will be on the European Commission's latest economic forecasts and on the ECB, with Mersch, Weber, Constancio all due to speak this afternoon.

Lloyds TSB Corporate Markets Economic Research

For more information: Emile Abu-Shakra Manager, Media Relations Lloyds TSB Group Media Relations Tel 020 7356 1878 http://www.lloydstsbcorporatemarkets.com/

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