httpvh://www.youtube.com/watch?v=7BS2fFfF5l8

Markets seemed to shrug off mixed data from Europe and the United States yesterday the largest earthquake on the eastern seaboard of the United States in the past hundred years to push equities and other risky assets higher with the S&P, NASDAQ and Dow Jones all reporting gains overnight of near 3%. The Asian session has been difficult however after Moody’s issued another downgrade on Japanese debt but things are relatively unchanged since the London close yesterday.

Data was mixed from Europe but with a negative lean yesterday with both Germany and France’s PMI numbers for the manufacturing and services sectors surprising to the upside but the new orders and business expectations (the more forward looking elements) side of things showed marked falls from even only a couple of months ago. Business output was also shown to have slumped in the Eurozone ex Germany and France in the past 3 months and shows that Q3 will probably be a lot tougher than Q2 was economically.

This was also evident in the gloomy ZEW economic sentiment survey published by Germany fell by more than when Lehman’s bit the dust. The decline was the largest since mid-2006 with respondents worried about falling equity markets, a lack of growth and political intransigence.

This didn’t stop a Spanish bond auction going through with a strong amount of demand but in this case all is not what it seems. While the yield, and therefore the perceived risk, falling and the bid-to-cover ratio, or demand, rising is a good thing in this case it is more to do with these investors trying to grab an almost risk free profit. They are seemingly betting on further intervention on the part of the ECB to buy up Spanish debt, driving the price higher. The investor can then offload his stake to the ECB and collect his winnings; simples, as a well known advertising campaign goes. This has nothing really to do with Spanish economic viability or the prospects for recovery and should not be treated that way.

In the US the continued pall in manufacturing caused the US dollar to slip yesterday afternoon with traders betting on further QE in the aftermath of a disastrous Richmond Fed PMI number. This follows the poor manufacturing number from the Philadelphia area last week. The result was the lowest since June 2009 and, like its European counterpart, showed falls in orders and unemployment.

We get another look at sentiment from Germany today with the publication of the IFO business climate survey. This should provide a more detailed look at the German corporate climate and is naturally expected to fall given the past few weeks’ shenanigans. We may also see some event risk surrounding the US Congressional Budget Office releasing its updated budget and economic outlook mid-afternoon.

The UK calendar is quiet.

Latest exchange rates at time of writing