Market update: Unhappy markets as the US Sequester is about to kick in and Chinese PMI data disappoints

The final trading day in February saw major US indices trim earlier gains in the day as hopes for a deal on the sequester – US$85bn automatic spending cuts due to start on Friday 1 March – were dashed with the latest proposal rejected by the Senate. The Dow Jones shed 0.2%; while the S&P 500 lost 0.1%, albeit clocking a fourth straight month of gains. Meanwhile economic data releases continued to paint a picture of sluggish economic recovery.

Asian markets were softer overnight, influenced by the latest official Chinese Purchasing Managers’ Index (PMI) that revealed the manufacturing sector grew more slowly in February. The Shanghai Composite shed 0.3%, and the Hang Seng was 0.6% lower, but the Nikkei continued to buck the trend rising 0.4% as investors continue to expect further easing steps. European PMI releases will be keenly watched today; stocks are softer this morning in Europe, at the time of writing the FTSE Eurofirst 300 is down 0.2% while the FTSE 100 is flat.