Chinese and US factory reports boost equity markets

07-01-2009 15:33

The US and Chinese manufacturing showed that the worldwide slump is weakening, on which the demand for equities increased, inclusive stocks from emerging markets, while the Japanese Yen and US Dollar dropped versus many of their main equivalents. Reports proved that Chinese exports rose, while manufacturing confidence increased less than economist’s estimations. The Japanese Yen fell on these reports versus the Single Currency to the lowest level in two weeks.

New global reserve currency

The Greenback dropped to below $1.42 against the Single Currency due to Chinese requests to discuss alternative options for a new worldwide reserve currency at the next meeting in Italy, according to Reuters, quoting Go8 sources.

Biggest losers

Bloomberg figures showed that in the second quarter of 2009 the Japanese Yen and the US Dollar posted the biggest losses versus the Single Currency, among the most intensive traded currencies. Investors are being stimulated to sell the Yen and the Dollar, which were obtained during the worst period of the recession, due to an easing worldwide slump.

Real versus Dollar

The Brazilian Real, introduced in 1994, showed a 23% fall in 2008 and posted a record gain yesterday. Today the Brazilian currency climbed 1.2% versus the US Dollar, reaching a 1.9287 level, while fluctuating 19% during the period April – June. Today, the BM&F Bovespa, a São Paulo-based equity exchange, went up 1.2%, after the 26% rise during the second quarter; the best quarterly result with regard to September 2005.

MXN advancing

The Mexican Peso (MXN) rose 0.6% versus the US Dollar, reaching a 13.1045 level and climbed 0.8% to 7.37 Japanese Yen. The Mexican Stock Exchange (Bolsa Mexicana de Valores) rose 24% in the second quarter; the biggest gain with regard to December 1999, while it went up 1.3% today.

Manufacturing shrink less

The ISM, Institute for Supply Management, an association for the benefit of the purchasing and supply management profession, announced that manufacturing in the US decreased at the weakest pace in the last 10 months. The Tempe, an Arizona-based Institute for Supply Management's index of manufacturing, climbed from 42.8 in May to 44.8: a record-high versus August (every score under 50 indicates a decrease).

China’s manufacturing

Manufacturing in China showed another rise; the fourth one. The China Federation of Logistics and Purchasing announced that the Purchasing Managers' Index (PMI), an indicator of the economic health of the manufacturing sector, went up to 53.2 in June, seasonally modified, while May resulted in 53.1 (every score higher than 50 implicates growth). “The news from China resulted in generating, or at least fueling, Yen selling,” commented Neil Jones at Mizuho Corporate Bank, Ltd. (MHCB), the corporate and investment banking subsidiary of Mizuho Financial Group. “It is not unlikely that risk markets and equities continue to rally.”. The Standard & Poor’s 500 Index, the second most widely followed index of large-cap American stocks, showed in the second quarter a 15% rally, while it rose 1% today.