The developed markets data pulse rose slightly last week (see chart 25). The index now sits at 40.5%, which is up from the lows seen in early July but is still well below the index's long run average.

Base effects meant that the data pulse indices were always going to bottom at some stage but now the focus shifts to what type of bounce we see and how long it is sustained for. While much of the current focus is on sovereign debt issues, data momentum will still have a strong influence on risk asset performance in the period ahead.

As my colleague in New York, Richard Franulovich noted (see 'Westpac Strategy Update: How "soft" is this soft patch?', 04/08/2011) 'If the August run of US data, commencing with the Aug NY Empire survey on 15 Aug, followed by the ISM and payrolls in early Sep, do not show a material recovery reflecting: 1) diminished supply disruptions out of Japan; 2) lower energy prices; and 3) the passing of the debt ceiling debate, markets could experience a sharp paradigm shift..."

The same argument can no doubt be made for other major economies as well. In terms of the US data pulse reading for the week just gone, it was basically unchanged at 41.5% (see chart 1). The improvement in the developed markets data pulse came from Europe, with the index rising from 29.9% to 32.7% last week (see chart 3).

The European data pulse is still at levels which suggests downside risks to PMI/IP readings in the period ahead.

Elsewhere the Japanese pulse eased back a touch to 55.1% (see chart 8) and judging by past experiences we are unlikely to see much of a rebound in this series beyond the 60% region. Sweden (chart 7, Switzerland (chart 5) and Norway (chart 6) all maintained depressed data pulse levels last week. Australia's data pulse (see chart 11) continued to rebound from low levels but it's difficult to get upbeat on the Australian data outlook. Indeed today we had a disappointing job ads number. The NZ data pulse (chart 12) is off its highs but continues a more upbeat picture compared to Australia and argues for selling strength in the AUD/NZD cross.

Emerging Asia

The Asian data pulse fell last week (see chart 23). This reflected a softer China data pulse, down to 25.5% from 30.7% last week (see chart 13). The PMI numbers were mixed for China last week, with the official estimates painting a more upbeat picture compared to the HSBC estimates. This week is quite an important one from a Chinese data perspective, with the monthly run of data due. IP figures have held quite well in the face of softer data for other parts of the economy. Our China pulse argues for downside risks for tomorrow's print, as it does for this week's other activity numbers.

For the CPI, the consensus/rumour mill seems to a suggest a print close to last month's year on year print of 6.4%.

Elsewhere, as always it was a mixed bag. India's data pulse recovered (see chart 18), while Indonesia (chart 21), Malaysia (chart 22) and Thailand (chart 20) either remained or pushed above the 60% level. In contrast South Korea (chart 16) and Taiwan (chart 15) remain well below the 40% level. Both indices are warning of an IP slowdown, which would match our view that China is currently experiencing a manufacturing slowdown.

All in all our data pulse indices are off their lows but they are hardly painting an upbeat picture for global data momentum at this stage.

As we noted above the next few weeks are likely to be very important from the perspective of global data momentum and in turn this will have an important impact on risk asset class performance.