While the euro was down to a two month low and equity markets worldwide dropped on weak information out of Europe and China, Wall Street was able to rebound on strong news from U.S. manufacturing and a jump in consumer sentiment.
The U.S. dollar and government bonds were up as investors looked to safe haven items due to new concerns over the now imminent U.S. budget cuts and the ongoing political problems that have gripped Italy following a deadlocked election that left no party with power.
U.S. manufacturing enjoyed its fastest rate of growth in over 18 months in February, which helped offset worries over the budget cuts taking place due to the sequester. The Institute of Supple Management index was released on Friday that gives the national factory activity for February. The results showed the index increased to 54.2 from January’s 53.1. Economists had predicted the index would contract to 52.5.
U.S. consumer sentiment increased in February said a report released on Friday, as Americans started to become more hopeful that employment figures would improve, even as the confidence in the government’s fiscal policy neared all time lows.
The budget cuts that will take place over the next six months when Congress and the White House could not find an agreement should not have too much of an impact on the economy said one Wall Street analyst. Even though it will affect the economy, it should not push it into another recession, said one S&P analyst.
