Risk assets managed to make a run higher yesterday as markets received a positive surprise from European manufacturing data, leading to analyst speculation that the worst of the current economic turmoil in the region is now behind us.  Also seen supporting this was an array of similar releases from both China and Australia which were also higher than market expectations.  What should be remembered, however, is that these expectations were still relatively low relative to historical averages, so these latest rallies will still be viewed by many as questionable at best (and also as new selling opportunities for equity markets).  The numbers out of Europe did beat market estimates but are still below the key 50 level which signals expansion.

Part of this latest optimism is coming as a result of Wednesday’s weaker economic data from the US, which led many to believe that we would see similar results in other regions.  The stronger numbers out of Europe helped calm some of these fears and confirmation of this improvement globally was seen during the Asian session.  In the US, the ISM manufacturing survey and the ADP employment report were seen lower and this has also led to downward revisions in the estimates for the next US Non Farm Payrolls numbers.  This release will once again be the main event to close the week as positions are squared into the beginning of the New York session on Friday.

Asian stock markets were higher on the Chinese macro releases and the improved corporate earnings report from Nomura Holdings, which helped push financials higher in the Nikkei 225.  In Australian markets, export companies were seen higher after the country’s Trade Balance for December showed a rebound, as the trade surplus is now measured at 1.7 billion Australian Dollars (AUD), from 1.3 billion AUD previously.  Part of the explanation for the rise in the commodity-rich nation came from the latest rise in gold prices and coal exports, and this was aided by a 1 percent decrease in the country’s total imports.

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