2:00 PM PT: Markets keep stretching
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While most Asian markets were narrowly mixed, the Shanghai Composite jumped on a stronger than anticipated China manufacturing PMI which is now at a 2 ½ year high. Across Europe, a string of positive PMI reports pointed to improved confidence in the outlook for growth. As a result, European markets added to yesterday’s gains. The magnitude of those gains may be held back by consideration of a new round of sanctions on Russia which could be announced at the EU summit next Wednesday.
Once again, earnings and economic data this morning provide a murky picture of the US economy. Earnings from 3M and Ford were well received while traders were disappointed with GM and Caterpillar. Initial claims for unemployment were reported at an 8 year low, but June Housing Starts and the flash PMI were both below expectations.
Starting to the upside on good China and European data, markets sank on the housing number but soon reversed and stretched out again to new highs. Optimism on the economy sent yields on the 10-Year note back above 2.5%, and weighed on gold and crude, with gold falling to lows not seen since mid-June. At the close, gains had moderated and stocks closed mixed.