Wednesday appeared to be one of those days where investors had so much news to digest; the market itself was left to drift aimlessly. On the macro front, the day started with Chinese manufacturing and Australian inflation. Chinese manufacturing came in line with expectations at 48.3, remaining below the 50 levels we often refer to, considered the difference between an expanding and contracting economy. The Shanghai composite index fell marginally on the day. Australian inflation, in common with many developed countries currently, came in below expectations. In Europe the purchasing managers survey found business activity at a 3-year high and the euro hardly moved on the news. Traders and analysts continue to debate how improving growth and weak inflation will dictate what the next move from the ECB will be.
In the UK, the Confederation of British Industry reported that British businessmen are now more optimistic that at any time since 1973. The minutes of the Monetary Policy Committee revealed that despite the UK economy continuing to show signs of improvement, the committee is in no hurry to raise interest rates.
In the US, a day full of bell-weather companies such as Procter and Gamble, Boeing, Comcast, Dow Chemical and Johnson Controls reported earnings as well as a surfeit of macro data. The macro data came in the form of housing and purchasing managers survey, both of which were below expectations. The company reports, at least at the earnings level, seem to come in close to analyst expectations and in most cases modestly ahead. It has to be remembered that a quarter’s earnings are historical, and as much as it is reassuring to see companies meet expectations, the outlook is just as vital. On that front a word of caution came from BCA research as they point out that roughly two-thirds of developed countries have a headline inflation rate below 1.5%, leading to a flattening of US import prices which in turn could suggest that forecasts continue to be unrealistically optimistic.
With so much focus on the macro and micro data, the increased tensions in the Ukraine seem to be being ignored by investors at present. It so often happens that investor’s attention is myopic, focussing on one subject at a time.