The death of the rational markets hypothesis
- The vexed debate around whether markets are rational or not would appear to have been answered with a resounding "not". Asian markets reacted to, of all things, a Chinese PMI sentiment reading of 50.1. This is not an instance of the economic data precision.
- Japan's Tankan survey of sentiment also provoked a reaction, with the manufacturing and capital spending data weaker than hoped for. The yen is turning out weaker than companies expected, however, which may boost profits (Japan-based exporters accumulate profits not market share on currency weakness).
- Euro area manufacturing PMI sentiment is likely to show economic expansion - the other economic data has pointed to expansion, and sentiment data is prone to exaggerate the trends. There will be divergence on display (France remaining negative) but the sentiment does not reflect reality here.
- The US ISM manufacturing sentiment survey completes the barrage of sentiment data that we have to endure today - we expect a 52.0 reading. Lockhart of the Fed is also scheduled to speak.