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Stocks are broadly unchanged this morning, despite Chinese manufacturing PMI data topping analysts’ estimates and growing at the fastest rate in 18 months. The mining sector shrugged off the Chinese report, as it highlighted the disparity between the large manufacturers and smaller operations. The latter had actually contracted over the last four weeks. Smaller manufacturing companies in China may be coming under pressure from liquidity issues within the interbank market.
Royal Bank of Scotland is leading the banks lower today after announcing another quarterly loss. The bailed-out firm has decided to create an internal ‘bad bank’ rather than split itself in two. The internal ring-fencing of toxic debts will weigh on healthy operations, ultimately prolonging the government bailout scheme. On the positive side, Direct Line Insurance Group, which was spun off by RBS just over a year ago, is in the black after revealing solid quarterly figures.
In the US, we are expecting the Dow to open 20 points higher at 15,545. Traders are looking ahead to the ISM manufacturing report at 2pm, keeping in mind the jump in Chicago PMI data yesterday.