Stocks shrug off disappointing manufacturing numbers

The poor manufacturing reports from China and the US failed to deter traders' enthusiasm for equities.

China flag
Source: Bloomberg

The positive run that stock markets have been enjoying since the middle of last month continues, as the broadly disappointing economic indicators that were released today helped the equity rally as central banks are more likely to keep monetary policy loose.

The official and private survey of Chinese manufacturing painted a bleak picture for the country but yesterday’s cut to the reserve ratio requirement could be a sign of what to expect as Beijing does have a large number of tools available to boost the economy. Even though the rate of unemployment in the eurozone dropped today, traders haven’t forgotten about the contraction in eurozone CPI yesterday and investors are anticipating additional easing at the meeting on 10 March.

The US ISM manufacturing report came in ahead of expectations but remained in contraction territory and that pushed back the chances of further monetary tightening from the Federal Reserve. Equity markets kept pushing higher even when oil prices turned south and this suggests the correlation between the two is weakening.

While the FTSE 100 is above 6128, its outlook will be bullish and 6169 is the next big resistance level in sight. The Germany 30 is also on the move higher and bulls will be keeping an eye on 9800. US equity markets are at the high of the session and US 500 bulls are looking towards 1971 while Wall Street buyers are focused on 16,844.

After doing its best to hold onto a positive move, gold as buckled under the pressure of the risk-on attitude by traders. The metal has been in an upward trend since the start of the year and pullbacks may see buyers enter the fold. While it holds above $1217 its outlook will be positive and bulls will be looking towards $1234 and $1248.

Keeping in step with the way it has been trading recently, oil pushed higher before quickly reversing and swinging to negative territory. The energy market has been moving higher since mid-February and the pullback may entice buyers, as buying the dip has been a popular strategy recently. The cutting of the reserve ratio requirement by the Chinese bank has overshadowed disappointing manufacturing reports from the country. Buyers of US Crude will be looking towards $35 and Brent bulls are keeping their eye on $37.

FTSE 100 risers and fallers (as of 4.15pm)


Company % change Index points
British American Tobacco +2 +5.7
Prudential +3.42 +4.27
Imperial Brands +2.47 +3.45
GlaxoSmithKline +1.07 +2.84
Reckitt Benckiser +1.66 +2.7


Company % change Index points
Barclays -8.11 -9.1
Ashtead Group -9.04 -1.63
Glencore -2.21 -1.34
AstraZeneca -0.52 -1.05
Royal Dutch Shell PLC - B




The day ahead

Economic data:

12.30am – Australia GDP (Q4): expected QoQ 0.78%, prior 0.9%. Expected YoY 2.85%, prior 2.5%

1.15pm – US ADP employment (February): expected 218,700, prior 205,000.

3.30pm – US oil inventories: expected 1.1 million barrels, prior 3.5 million barrels.

7pm – US beige book:

Central banker speeches:

3pm: Fed member John Williams is speaking in California 

Corporate reporting:

UK: ITV, Stagecoach Group

US: Costco Wholesale Corp, Abercrombie & Fitch Co

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.