Joshua Raymond of spread betting provider City Index looks at the challenges facing the markets for 1st September 2010

Greater London, England -- (SBWire) -- 09/13/2010 -- Joshua Raymond, Market Strategist, City Index commented:

“Investors bought into stocks today bullied by outperforming economic data from the US after ISM manufacturing data unexpectedly rose to 56.3 in August. The market had been expecting a fall in factory activity and the resilience showed in Augusts performance is raising optimism amongst investors that perhaps the ‘double dip’ theme has been over played. Moreover manufacturing prices surged to 61.5, much higher than the 55.0 expected which could insinuate that demand is gaining in traction. However, new orders continue to come off from Aprils high and this is likely to keep any new optimism in growth that may spin off the back of the ISM number on a leash.

There can be no doubt however that today’s ISM manufacturing data is a welcome surprise and has increased investor appetite for risk. We have seen strong performances across the board in riskier asset classes whilst the defensive assets such as the US Dollar have been sold off. Whether or not this trend could continue remains to be seen with Fridays all important jobs data all on investors’ minds.

It’s the first day of a new month and there is likely to be a degree of fresh position trading from investors which could ultimately be playing a role behind the positivity towards today’s session. But it is the US ISM data, which blew away most market expectations and provided a second wind to earlier gains that had started to consolidate throughout the afternoon.

Investors have been in a bullish mood for much of the day, buying into the heavyweight mining and energy stocks. The high demand for miners and energy firms had been helped by stable manufacturing data out of China early this morning which has helped to raise hopes that a slowdown in demand may not be just around the corner. As soon as the US ISM data came out however, stocks got a second wind and we saw a significant increase for risky asset classes, which has helped to drive the three heavyweight sectors, the banks, miners and energy firms even higher on the day.

It’s been a positive last few days trading on the FTSE and other key European Indices. The FTSE 100 has rallied over 5% since the low of 5070 five trading sessions ago which represents a fairly solid bounce back. However, the FTSE 100 needs to break above 5435 and out of its current trading range before investors might feel enticed to build on positions even further.”

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