Strong US data ignored by Dow, as Europe wallows in its own misery

With Japan quiet after their steady stream of announcements in the past few days, focus returned to the US as traders watched to see the resilience of the Dow et al. in the face of more US data.

As the Dow Jones opened, the global markets were still feeling the strain that originated from the vice-grip of poor figures from Europe and China alike. Due to this the Dow was unable to buck its trend from the past week and a half of opening lower than the previous day’s close, opening today at 17677.5 after a closing figure of 17683 on Wednesday.

This drop came despite positive data arriving from the US today, with CPI at 0.0%, better than the forecast -0.1%, and core CPI reaching 0.2% as predicted. Unemployment claims were higher than the forecast 286k at 291k; despite this missed target, this figure is still the lowest it has been since 2000. The USA’s flash manufacturing PMI was disappointing, arriving in at 54.7 instead of the predicted 56.2. But the weakness of the PMI was countered by the staggering Philly Fed manufacturing index number, a whopping 40.8, more the double the predicted 18.9, and its strongest performance in 21 years.

In terms of specific stocks on the US markets, Best Buy was the best buy today, as its third quarter figures were better than expected. Total revenue was up to $9.38bn from $9.32bn, whilst comparable-store sales rose 2.2%. This latter figure is a higher growth level than both Walmart and Target. Most significantly, net income more than doubled to $107 million from $54 million. Unsurprisingly, these numbers imbued investors with a bullish spirit and shares grew by nearly 6.5% to reach an intraday high of 3866.5.

Similar good news was found on the forex. After its progress had slowed for the past few days, the dollar began today with a renewed vigour against the yen, hitting an intraday peak of 118.972, achingly close to the 120 mark. The Dow may be flagging slightly, but its own continual success at reaching new closing highs, combined with a strong greenback, is providing enough positive sentiment to allow the Dow to maintain its run, apparently regardless of outside factors.

Europe’s shaky morning continued into the afternoon, with Eurozone consumer confidence dropping to -12 from an already poor -11, as the DAX spent much of the day wallowing around the 3450 mark after starting the day at 9470. However the euro fared slightly better, with the EUR/USD remaining flat at around 1.25373. The UK didn’t escape unscathed from the Europe’s negative pull today, as the FTSE spent the day hovering around the margins of 6650, after opening at closer to 7000. This comes despite retail sales growing by 0.8%, above the forecast figure, pushing the yearly retail sales growth to 4.3%. The low price of oil has theoretically put extra money into consumers’ pockets, yet the FTSE couldn’t take advantage of this positivity.

Finally, the seeds of discord were further sown between the UK and the EU as the latter dismissed the former’s plea to rescind their cap on bankers’ bonuses. Under this law, bankers’ bonuses could not be more than 100% of their annual wage; the purpose of such a law is to prevent bankers’ taking unnecessary risks in order for short term rewards. The City of London’s significant banking population claimed the enforcement of such a cap would push up fixed pay, which in times of crisis becomes harder to cut than bonuses. More importantly, the move, rightly or wrongly, adds fuel to the fire of the anti-EU movement in the UK, as epitomised by UKIP’s potential victory in the by-elections today.