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Stock markets ‘boom’ despite General Motors going bust

Last night, news of the ‘stock market boom’ spread fast and hard. As the markets closed, strong rises were evident all over the world, in China, the UK and the US. Oil prices soared, reaching their highest level this year, and the Pound regained some lost ground on the Euro and the Dollar.

Manufacturing Boom.

US car giant, General Motors, may have entered bankruptcy protection yesterday, but all is not lost for UK manufacturing. The Purchasing Managers’ Index (PMI) shows that, although manufacturing is still shrinking a shrinking sector, the market contracted much less this May than any other month this year.

Although a manufacturing PMI below 50 still indicates contraction, the index in May was 45.4, up from 43.1 in April. And the improvement in May is not completely anomalous, but goes with a trend of augmentation seen in the two consecutive months preceding it.

“Although the index remains below levels consistent with outright recovery, this is a further sign that the downturn in UK manufacturing is easing” – Rob Dobson, senior economist at Markit, which produces the PMI

Another study, by the Engineering Employers Federation, suggests that UK manufacturing growth could even return by the end of 2009

Sterling rises as Dollar continues to fall.

The pound rose to $1.644, a stark improvement on $1.37 in March and its highest in seven months. The Euro also rose against the Dollar, which reached its fifth month of decline. For those of you planning a holiday to the continent this summer, your pound is now worth €1.16.

In a BBC article, Kim Caughey, equity research analyst at Fort Pitt capital Group, was more cynical about the supposed boom and said “I can’t really buy into today’s super-happy stock market’. However, with yesterday’s FTSE up by 2% and the Dow Jones, by 2.6%, no one can argue that the figures don’t look positive.

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