Parsing today's EuroZone PMI data is not an easy task. The markets clearly liked the numbers, as all European bourses are in the green today, and the narrative seems to be "no Brexit shock, all is good." The headline figure was Markit's Composite Output Index, which registered 53.3 versus 53.2 in July.
While Markit's press release correctly pointed out that the 53.3 figure is a seven-month high, the range in data in that seven-month period is so narrow that the figure itself cannot be considered statistically significant.
Markit also compiles Germany-only data, and those data, also released today, showed a picture of an economy that, while stronger than the rest of the continent, is clearly losing momentum. The headline Manufacturing Output figure for Germany fell to a two-month low of 54.4, and more disturbingly, the Services PMI fell to a 15-month low of 53.3.
So, what's going on in Europe? It's really more of the same. Slow growth, decent output and a lack of job creation (Markit's Composite Employment Index showed job growth weakening to a three-month low in August.)
That's what those of us who follow Europe have been expecting, and that's what the central bankers have been basing monetary policy on, so, it's fair to say things haven't changed since the "Brexit" vote occurred.
Of course, it's probably helpful to note here that Brexit hasn't actually happened yet, and no one knows when it will. British PM Theresa May has signalled that she won't begin the process of exiting the Treaty of Lisbon until 2017. Since no country has ever left the EU, it is impossible to accurately predict how long the actual Brexit process will take.
Maybe Brexit will be the earth-shattering event that so many in the media made it out to be on Jun. 23, but in the meantime, the markets will react to actual facts, not speculation. The simple fact is that the ECB's overnight lending rate of -0.40% is the lowest it has ever been, and the Bank of England's recent cut in its overnight lending rate to 25 basis points put that figure at the lowest since records have been kept -- dating back to 1694.
Near-zero -- and worse, negative -- interest rates have not had the stimulative effects in Japan, Western Europe or the U.S. that policymakers had hoped. No sentient person could argue otherwise. Low interest rates are horrible for savers -- disproportionately impacting the elderly -- and lead to bubbles forming in assets that are sensitive to interest rates, which probably include all the ones that you care about.
But I'm an analyst not a politician (thank God), and it's hard to say these low rates are bad for stocks. Given the natural discounting mechanism on which equities are priced, lower interest rates should, other things equal, lead to higher equity valuations, and that's exactly what we're seeing.
So, I'm still more bullish on Europe, especially the U.K., than I am on the U.S. I discussed BHP Billiton (BHP) (Australia-headquartered, but UK-listed and included in the FTSE 100) in a recent Real Money column, and the shares are rockin'. BHP's shares have risen 3% today on the back of an upgrade from Jefferies. Those shares have risen 40% year-to-date -- and more than 25% since the lows of "Brexit Friday." BHP is working, and with the punchbowl of easy central bank money seemingly in no danger of being pulled away, I see no reason to sell the shares now.