US indexes finished marginally higher Wednesday as improved services sector and payroll data lifted investor sentiments but the gains were pared after China’s official non-manufacturing PMI reading for August dropped to the lowest level since March 2011.
The Institute for Supply Management’s non-manufacturing index that covers nearly 90 percent of the economy rose to 55.1 in September from 53.7 in August, its highest reading since March.
The ADP Employer Services report, the frontrunner to the all-important non-farm payrolls data due later this week, showed US private sector created 162,000 jobs in September, beating forecasts made by most economists but lower than the prior month’s revised estimate of 189,000. However, in the past these ADP numbers have not been a reliable heads up indicator of Friday’s payroll report.
Off from its intraday gain of 54 points, the Dow Jones Industrial Average (DJIA) settled 12 points higher. Marking its third straight day of gains, the S&P 500 Index (SPX) added 5 points, with financials and telecommunications pacing the gainers and energy and materials faring the worst among its 10 business groups
Heightened uncertainty in Spain spiked the demand for safe haven assets, pushing yields of US government debt to near three-week lows. While addressing a press conference in Madrid, Spanish Economy Minister Luis de Guindos said the country won’t recover from the present crisis unless all doubts about the euro’s future are answered.
Spanish Prime Minister Mariano Rajoy yesterday had denied media reports that suggested Madrid is likely to seek help as early as next weekend.
The 10-year Treasury note yield fell one basis point to 1.61 percent while the yield on 30-year Treasury bonds remained flat at 2.82 percent.
Meanwhile, the US dollar made gains against the euro and the Japanese yen following better than expected jobs and services sector report.
Across the Atlantic, the pan-European Stoxx Europe 600 index finished the day 0.1 percent lower following a choppy trading session. Sentiment was dented over worries that a Spanish bailout request may take place later than sooner in the face of the ECB’s unlimited bond-buying backstop facility.
Dragged down by index-component BBVA SA, the Spanish IBEX 35 index closed 0.5 percent lower.
Data from the Eurozone continued to disappoint with the composite purchasing manager’s index for September tumbling to a four-month low.
The German DAX 30 index turned higher, adding 0.2 percent after Deutsche Bank jumped 2.3 percent.
In Paris, the CAC 40 index tripped 0.2 percent after Alstom SA and oil group Total SA tanked 0.3 percent and 0.8 percent respectively.
In London, the FTSE 100 index moved higher, helped by miners and the banking sector.
In the ETF space, commodities-linked funds, particularly those related to energy futures, got hammered over China growth worries. The world’s second largest economy is likely to represent 10.6 percent of global crude demand and negative economic numbers from Beijing weighed heavily on commodities.
The United States Oil Fund (USO) was one of the biggest percentage decliners, losing 4.14 percent on the day. The United States Natural Gas Fund (UNG) also tumbled, shedding 2.65 percent for the day.
The iShares Dow Jones U.S. Home Construction Index Fund (ITB) was one of the biggest gainers for the day, vaulting 4.07 percent as momentum in the housing sector continued to build up. The Mortgage Banker’s Association index that tracks mortgage applications surged 16.6 percent for the week ended Sep. 28, up from the prior week’s 2.8 percent gain.
Disclosure: No holdingsContact Ulli