The question was though is how would markets start the new week. A follow up on Friday would buttress the feeling that it wasn't just a one shot deal. So what are we seeing? Alas, the US stock market is down, though Europe was up both on optimism about the deal and also hope that the ECB will cut rates this week.
What's driving us down here is a disappointing ISM report on US manufacuturing.
"U.S. manufacturing contracted for the first time in two years in June. The Institute for Supply Management reported its index of manufacturing activity fell to 49.7. That's down from 53.5 in May and the lowest reading since July 2009. Readings below 50 indicate contraction. Analysts were expecting a slight expansion."
This by itself was at least in the early going enough to tank the US markets even though another report shows that US construction spending in May was up to its highest level in 2 and 1/2 years.
"U.S. construction spending rose to its highest level in nearly 2-1/2 years in May as investment in residential and federal government projects surged, a rare dose of good news for the flagging economic recovery."
"Construction spending increased 0.9 percent to an annual rate of $830.0 billion, the highest level since December 2009, the Commerce Department said on Monday. That followed an upwardly revised 0.6 percent rise in April."
"Economists polled by Reuters had expected construction spending to rise 0.2 percent after a previously reported 0.3 percent gain in April."
We've come full circle as now housing is one of the few bright spots for the recovery-in the long term could this harbinger good thngs?
"The gain in construction spending in May was driven by a 1.6 percent rise in private construction outlays. Spending on residential projects jumped 3.0 percent to the highest level since January 2009."
"Private nonresidential construction spending rose 0.4 percent to the highest level since October 2009. Investment in multifamily residential projects surged 6.3 percent, while outlays for single-family buildings increased 1.8 percent."
"Residential construction is expected to contribute to growth this year for the first time since 2005.
"Spending on public sector construction dipped 0.4 percent to $269.6 billion, down for the fifth month. However, outlays on federal government projects jumped 5.6 percent, the largest gain since December, almost reversing the prior month's drop."
However outlays on state and local government projects dropped for the fifth straight month. Still if Europe is starting to get it-as Krugman put it, this latest idea can be considered the European Tarp and the devil remains very much in the details that we will see begin to trickle out this week-and with the US housing market believed by many to now be pulling out of it these better construction numbers could auger very well.