Market update: Fair is foul and foul is fair; bad data lifts investor spirits – 04.06.2013

Source: Henderson Global Investors

It was a case of ‘fair is foul, and foul is fair’ in markets yesterday. The S&P 500 (+0.6%) and Dow Jones (+0.9%) were lifted by news of weaker than expected US manufacturing data, which raised hopes the US Federal Reserve will continue to maintain the pace of its asset purchases. The Institute for Supply Management’s manufacturing index fell to a four-year low of 49.0 in May (50.7 in April) confounding analysts. The forecasts indicated that US companies had reduced their output in response to tighter fiscal policy and weaker growth in overseas markets. In contrast to Wall Street’s rise, European markets pulled back when May eurozone purchasing managers (PMI) manufacturing indices came in better than initially estimated, indicating the pace of contraction in the region may be slowing.

Overnight, Japanese equities put in a strong performance, recovering some ground from their recent falls. It was reported that the Japanese government will urge the overhaul of the nation’s public pension funds (approximately $2 trillion), which could include them increasing their investments in equities and overseas assets, helping to mobilise growth. Investors are in a relatively upbeat mood this morning following this news and as concerns over US stimulus ‘tapering’ ease; the FTSE Eurofirst is up 0.5%, with the FTSE 100 0.6% higher at the time of writing. In stock news, chipmaker STMicroelectronics is outperforming after it said it expects growth of between 5-10% this year.