Market update: Investors cautious as Obama gains Congress support for Syria action – 04.09.2013

Source: Henderson Global Investors

Yesterday, news that President Obama’s call to action on Syria had received support from Congress initially drove US markets lower. But these losses were later reversed with the release of a stronger-than-predicted August Institute for Supply Management (ISM) manufacturing reading. Driven by strength in new orders and production, the index rose to 55.7 from 55.4 in July. A reading of more than 50 denotes sector growth. Meanwhile, another boost came from construction spending, which grew by 0.6% in July; analysts had forecast a weaker 0.4% rise. Following the stronger data, US 10-year treasury yields rose to 2.91% at one point as investors’ expectations for an announcement about the withdrawal of the central bank’s asset purchase programme later this month increased. The S&P 500, the Dow Jones and the Nasdaq gained 0.4%, 0.2% and 0.6% respectively.

Overnight in Asia, the Nikkei closed up 0.5%, boosted by a weakening yen. The Shanghai Composite also rose, climbing 0.2% but the Hang Seng finished 0.3% lower. The Australian economy recorded second quarter growth of 0.6% quarter-on-quarter or an annual rate of 2.6%; following this the Aussie dollar surged against the US dollar.

European stocks are trading in negative territory this morning on concerns about Syria. The FTSE Eurofirst 300 is down 0.4% while the FTSE 100 has lost 0.5%. The UK’s service sector recorded the strongest growth in six years in August. The Markit/CIPS services purchasing managers’ index (PMI) climbed to 60.5, its highest level since December 2006. The final reading of Markit’s eurozone composite PMI for August came in at 51.5 (first estimate 51.7), confirming a modest economic recovery in the region.