Friday Morning Cheat Sheet: 3 Stories Moving Markets

The markets were mixed in Asia overnight. Japan’s Nikkei climbed 0.47 percent to close just under 11,200. The yen weakened further and is trading at 92.20 to the dollar. The Hang Seng fell 0.03 percent, perhaps weighed on by mixed PMI data out of China (details on the next page), while the S&P/ASX 200 increased 0.87 percent.

The markets were all enjoying gains in Europe at mid-day. Germany’s DAX was up 0.27 percent, London’s FTSE 100 was up 0.47 percent, and the STOXX 50 was up 0.14 percent. Brent crude was also up slightly to $115.90 per barrel.

U.S. futures at 8:35 a.m.: DJIA: +0.40%, S&P 500: +0.46%, NASDAQ: +0.56%.

Here are three stories to keep an eye on:debt

1) The threat of federal default has been postponed until August. The U.S. Congress approved a plan on Thursday to temporarily remove the national debt ceiling and allow the government to continue spending. Previously, national debt had been legally limited to $16.4 trillion. Without this measure, the Obama administration had estimated that the U.S. Treasury would run out of funds by early March.

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The plan agreed upon by lawmakers in the U.S. House of Representatives is an unusual one. The debt limit will not be enforced through May 18, allowing the government to continue borrowing money to pay the nation’s bills, including Social Security checks, the military payroll, and interest payments on existing debt. On May 19, the debt ceiling will be put back in place… (Read more.)

manufacturing-image2) The HSBC China Manufacturing PMI hit a two-year high in January, climbing 0.8 points to 52.3. A PMI of greater than 50 represents expansion of the sector, while a reading below 50 represents contraction. This is the third consecutive month that HSBC’s PMI Index has been above 50, after averaging a rate of contraction for most of 2012.

“A high reading of January final manufacturing PMI implies that China’s manufacturing activity is gaining further steam on the back of improving domestic conditions. We see increasing signals of sustained growth recovery in the coming months,” commented Hongbin Qu, chief economist for China and co-head of Asian economic research at HSBC.

However, HSBC’s report, which is biased toward smaller, privately-owned companies, differed from the government’s official report, which is biased toward larger, state-owned companies. China’s official reading showed a slowdown in growth from 50.6 in December to 50.4 in January.

3) The long-running downturn in European manufacturing eased slightly in January. The Markit Eurozone Manufacturing PMI reached an 11-month high of 47.9, with output rising in Germany, the Netherlands, and Ireland, but once again falling in France, now at a four-month low of 42.9.

“While the industrial sector looks likely to have acted as a drag on the eurozone economy in the final quarter of last year, deepening the double-dip downturn, the PMI provides hope that the first quarter could mark the start of a turnaround,” commended Chris Williamson, chief economist at Markit. “Providing there are no further set-backs to the region’s debt crisis, these data add to the expectation that the eurozone is on course to return to growth by mid-2013.”

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