With the run into Christmas firmly ahead of us and summer markets hopefully done with for another year, we can hope to see some trends re-emerge in markets. This morning, however, those trends look to be still in bed.
China manufacturing further falls
As it is the first of the month, it is manufacturing PMI day from the global economy. China’s news overnight has once again cast a pall over proceedings this morning with the Japanese yen, Swiss franc and the euro all benefiting from the US dollar’s decline. China’s manufacturing PMI fell to the lowest level in three years in August – not exactly a surprise given the flash figure a week ago painting a similar picture. Reasons for the slowdown are numerous, including the huge explosion in Tianjin and a cut in factory production on environmental concerns ahead of some country-wide celebrations this weekend.
The waves to hit Europe
The impact from this on European and US manufacturers and consumers is an obvious decline in prices and further deflationary pressures. With China’s release out of the way, we focus on Europe and the US. Italy’s number is due at 08.45, France at 08.50, Germany at 08.55, and the Eurozone wide measure at 09.00 with the UK number due at 09.30.
Once again, it will be interesting to see whether PMIs in Europe have rebounded in July following the announcement of a tentative accord between Greece and its creditors. The US’s ISM number will be released at 15.00 BST.
Fed mumblings remain unclear
The main trend for Q3 and Q4 will remain what happens at the next three Federal Reserve meetings. The Deputy Chair of the Federal Reserve, Stanley Fischer, spoke at the Jackson Hole symposium of central bankers, and remained confident that inflation would move higher. Comments from Bank of England Governor Mark Carney that the recent noises out of China did not warrant a change in the Bank’s thinking around interest rates were the highlight of the conference.
That speech from Fischer has pushed the probability of a rate hike by the Fed in September to 38% from 30% on Thursday. Before the weekend, we held a webinar on the impacts of the Federal Reserve rate hike and reasons why they may or may not go for a September rate rise. If you missed it, you can see a recording of the presentation here.
RBA hold policy in September
Central banking policy was held firm in Australia overnight as the Reserve Bank of Australia aimed to cushion the commodity and China driven slump in Australian productivity. “Most of the available information suggests that moderate expansion in the economy continues,” Governor Stevens said of Australia in the accompanying statement. The AUD is roughly unchanged on the session.
