Chinese manufacturing inspires FTSE

By mid-afternoon the FTSE 100 was up 69 points and looking set to post its most positive day's performance in August.

Traders might have expected interpretations of last night’s US FOMC minutes to drive the market today, however their thunder has rather been stolen by the impressive turnaround in Chinese manufacturing PMI. The jump from 11-month lows to four-month highs in a single stride has certainly filled European traders with renewed confidence that Chinese demand can once again lift markets higher.

UK markets

The FTSE 100 has managed to claw back all of its losses from yesterday, buoyed by a resurgent Asian market which was boosted by Chinese manufacturing figures. It is beginning to look even more convincing that the Asian powerhouse is getting back up to full speed. The lack of any real developments in the US, in terms of the timeline for QE tapering, has seen discussions about this topic relegated into second spot. 

Germany too joined in with the good news, posting better-than- expected service and manufacturing PMI figures. These were good enough to outweigh the fall in France's figures and ensure the EU as a whole continued moving in the right direction. This is a timely boost for Angela Merkel, and arguably the stability of the EU, just ahead of the looming German elections.

US markets

What did we learn from last night's Federal Reserve minutes? Not a great deal. There are those on the FOMC committee who would introduce cuts in September, and just as many who would introduce them in December. Ultimately we did receive confirmation that the US will start trimming before the year is out. Institutional consensus is still that we will see $10 billion cut from the monthly debt-buying budget. Attention can now be turned to the annual Jackson Hole get-together, but with Mark Carney, Ben Bernanke and Mario Draghi absent we are left wondering if it has quite so much relevance as in years gone by.

Commodities

The improving manufacturing picture in Europe, coupled with last night’s HSBC Chinese manufacturing data, saw copper spike higher in early trading. As growth figures from the Asian giant continue to pick up pace, metals look set for a reinvigorated charge higher. Crude has had a corrective pull-back in the last couple of days, but with Egypt far from stable, strikes continuing in Libya and the US driving season only around the corner, oil traders will be bracing themselves for a supply/demand squeeze that ultimately looks set to punish UK drivers with higher prices at the pumps.

FX

Having hoped for a bit more clarity from last night’s FOMC minutes, in terms of US dollar devaluation in the form of QE, traders are still almost as confused as before. The Japanese Abe-economics plan to drive the value of the yen lower has rather stalled of late, but the USD/JPY currency cross looks to have turned a corner in the last 24 hours and may be set to tackle the ¥100 level in the coming days.

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