What does Better (Global PMI + US payroll data) equates to?

(Posted Monday 250am)

The equation,

Better (Global PMI + US paroll data) = RISK ON!

As you probably know, PMI data coming from US, China, UK, etc has been better than expected. Global equity markets extended their weekly climb with the exception for Mexico, Australia, KL and Japan, just to name a few.

Some of you may not have realised that the US market had been stronger than expected. With the latest US data, the Non Farm Payroll and Unemployment data lowering to 8.3%, the Fed Chairman’s monetary policy of holding the Fed fund rates to end of 2014 is a question mark!

This is interesting. Did you know that the Dow Jones IA closed last week at a 3 ½ year high breaching the Q3 2008 high before the Global Financial Crisis (GFC). It broke my resistance level of 12,800! And the S&P Golden cross is evident! Do we need QE3?

VIX and the dollar Index. The US dollar index met resistance at the 81.5 resistance and reversed course following lower global growth worries. Couple with better France, Spain, Italy bond auctions after S&P downgrades France, the volatility index, VIX plunge to levels below 20.

I don’t need any stinking QE3. With the above, the probability of QE3 may be lowered. As Gold is the primary beneficiary for monetary easing or QE3 prospect, spot Gold plunged!

On Friday, the Europe crisis prolongs with high yield Portugal bond auctions and extended Greek talk with the Trioka. As a result the Euro plunged after climbing against the US dollar after the payroll data. On the other hand, commodity currencies like the Aussie rose to the highest level as carry trades is attractive in a low VIX environment.


Updated 6th Feb 0630 am. Greece PM and the Trioka agrees on Deal Framework. Details of framework to commence later Monday Greek time vs China’s Lowest Lunar Sales Since 2009. What I wonder which side would Asian investors mindset be focus on?

 

If you were to realize the above, it is EVIDENT that global equity markets are temporary disconnected with the prolong debt situation in Europe. I think global investors are NUMB (by now) but I speculate there will be one more possible dip before end of month. This would be another possible buy-on-dip.

The after effects of a better than expected US payroll data had not been reflected by Asia. There is a possibility that the US might pass the rally baton to Asia or would Asia markets fade towards the European markets opening because of a prolong Greek-Trioka meeting?

I have a personal interest in Indonesia and am eagerly awaiting their GDP data, due Monday with a better than expected GDP data!

If you’re a global investor, you may probably know that inflation had receded in most countries and most Central Banks has lowered interest rates to support growth rather than battle inflation. Particularly of interest are in Emerging markets as well as BRIC. The yield curve is leaning towards being normal. As such, it is a no-brainer that BRIC economies like Brazil, Russia, India and China resulted in a better performance than developed economies YTD.

WARNING. Do not be too greedy. Expected the unexpected if you are not following closely on the Baltic Dry Index and its possible consequences!

For new audience joining my blog, we welcome you. You may also be interested to know that this is probably the ONLY blog to speculate that markets

·         Would fall three months before the DOW plunge a 2011 low prior Oct 4^th 2011 and

·         Would rise three months before the DOW breached a 3 ½ year’s high of current!

Please feel free to read Market Trends, Investing commencing May June 2011 and Oct Nov 2011 for my speculative posting.

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