Tuesday, January 3, 2012

The December ISM came in at 53.9 (above expectations of 53.5) and better than 52.7 in the prior reporting month. That's the best print in six months and well above the six-month average and long-term average of about 51.7. In terms of components production and new orders, we're at an eight-month high.

If there is one factor that is beginning to concern me regarding the markets and the economy, it is the rising price of crude oil -- now up by nearly $4 a barrel, to $102.50.

From my perch, the four conditions for a sharp upward turn in equity prices are moving into place:

1. reduced volatility;
2. improving domestic economic statistics;
3. aggressive moves to address/contain the European debt contagion;
4. and a more pro-active movement on the U.S. fiscal imbalances and pro-growth policy (in large measure brought on by a growing likelihood of a Republican presidential win in November).

A soft landing in China and India? China's December PMI was better than expected at 50.3 -- the consensus was at 49.1 -- and the prior month came in at 49.0. China's December non-manufacturing PMI at 56.0 was well above the November print at 49.7. Manufacturing expanded above consensus in India.

German unemployment fell by a better-than-expected 22,000 jobs. U.K. December manufacturing also rose above expectations.