US equity ETFs ended the first day of the quarter mostly higher after data released by the Institute for Supply Management showed US manufacturing activity rose to 51.5 in September, marking its first expansion in four months.
However, risk appetite diminished after Fed Chairman Ben Bernanke said headwinds to the economy due problems in Europe and ECB actions will not solve current problems, but will only provide time, deflating investor enthusiasm.
After vaulting as much as 161 points following the September ISM reading, the Dow Jones Industrial Average (DJIA) settled a more modest 78 points higher while the S&P 500 Index (SPX) added 3 points with healthcare and consumer staples outperforming and technology and utilities sinking the most among its 10 business groups.
The allure for safe havens spiked, pushing Treasury securities to near three-week highs after a September government survey showed manufacturing contracted for the second month in China. Risk aversion soured further after a Bank of Japan survey showed business sentiment has eased in the third quarter.
Unemployment continues to be worrisome in Europe with the jobless rate within the 17 nations that use the euro remaining at a record high of 11.4 percent in August, the same as the revised estimates of June and July.
The benchmark 10-year Treasury yield fell two basis points to 1.61 percent while yield on 30-year Treasury bonds also dipped two basis points to 2.81 percent.
Meanwhile, the dollar was on the defensive Monday after a positive report on manufacturing eased some worries on the economy’s trajectory. The dollar index, a gauge of the greenback’s strength against a basket of six currencies, fell to 79.796 from 79.89.
European stocks shrugged off weak Asian growth data after a surprise uptick in US manufacturing despite the eurozone’s PMI-manufacturing showing continued contraction. The Stoxx Europe 600 index jumped 1.4 percent, the biggest single-day gain since Draghi announced his Outright Monetary Transaction plan September 6.
Led by the banks Banco de Sabadell and Banco Santander, the Spanish IBEX 35 index ended one percent higher. Ratings agency Moody’s said Spain’s recent bank stress-test results are credit positive, but warned recapitalization of the country’s savings banks may prove insufficient.
In Germany, banks lifted the DAX 30 index 1.5 percent after Commerzbank AG and Deutsche Bank jumping 3 percent and 2.7 percent, respectively.
Credit Agricole SA jumped 7.4 percent after the French lender said it has initiated talks with Greece-based Alpha Bank to sell its Greek subsidiary Emporiki. The CAC 40 index closed 2.4 percent higher
In London, the FTSE 100 index surged 1.4 percent as miners rallied after independent board members of Xstrata PLC approved rival Glencore’s revised takeover offer.
In the ETF space, the United States Natural Gas Fund (UNG) leapt 4.64 percent after NG futures hit the highest level in almost 10 months following forecasts for cooler Midwest weather.
According to Weather Derivatives in Belton, Missouri, demand for heating fuel will be 78 percent above normal between October 7 and October 11 as the first cold blast is supposed to hit central US over the next six to ten days.
There were no noteworthy changes to our Trend Tracking Indexes.
Disclosure: No holdings