Strong auto and jobs growth more than offset curious manufacturing weakness

ISM data this week slipped below the closely watched 50 level but shouldn't cause much concern.

Robert Johnson, CFA 5 December, 2015 | 6:00PM Roland Czerniawski

There was a lot of up and down action this week in most world markets, but by the end, no net change in prices. U.S., European, and emerging markets were all virtually unchanged, a highly unusual state of affairs.

Most world markets had one of their best days of the year Friday and one of their worst on Thursday. The very widely anticipated European Central Bank monetary announcement on Thursday underwhelmed traders, setting off a chain of trades to unwind big ECB-related bets. In reality, the ECB monetary policy changes weren't all that far from expectations. The ECB actually raised its economic growth forecasts, and the U.S. jobs report was at least a little better than expected, causing everyone to dive to the other side of the boat on Friday. The S&P 500 fell 1.4% on Thursday and then surged over 2% on Friday. For the whole week, the S&P was up just 0.1%. A lot of heartburn for not much gain. Even commodities and interest rates showed little change for the week.

The U.S. economic data for the week was mixed. Manufacturing looked terrible, according to the Institute for Supply Management's report on Monday, slipping below the closely watched 50 level. However, there were enough inconsistencies in the report and a belief that the manufacturing sector is too small to affect the broader economy that the market had little reaction to the news. We also think the ISM news was irrelevant, but for much different reasons. We explain why later in this report.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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