Manufacturing PMIs are in, and the results are not good. On Monday, Australia and a number of European nations revealed manufacturing sectors firmly in decline, with the EU as a whole coming in at just 45.8. A reminder that anything below 50 indicates a sector in contraction. Among major economies, the UK was the only one to publish above that threshold at 52.5. Things went from bad to worse on Tuesday when North America chimed in with its own figures. Canada managed to beat expectations at 49.5 but US manufacturing fell short, with the S&P Global figure coming in at 47.9 and an even more pessimistic ISM number of just 47.2.
Markets are somewhat jittery in light of the fragile economic recovery and fears of reduced global industrial output, not to mention the Fed’s rate decision in a couple of weeks. Stock markets are sensitive to economic data in the current climate and did not take the manufacturing publications well. Technology stocks in general were hit pretty badly yesterday - Nvidia in particular plummeted 9.5%. The poor performances dragged the Nasdaq Composite down over 3%, the S&P 500 and Dow Jones also sustaining punishing losses. The Japanese Nikkei 225 index, which hadn’t had a chance to digest the US data prints yesterday, was clearly spooked this morning, opening low and falling as much as 4% at one point.
Ultimately the oil markets were the hardest hit. Oil prices fell by 5% yesterday, Brent Crude down to $73 a barrel, WTI down to just $70, both now at yearly lows. Oil is facing the double pressure of reduced global demand coupled with an inability of OPEC+ to stick to production cuts.
Looking forward, services PMIs are poised to steal the spotlight today, before US jobless claims on Thursday and then Non-Farm Payrolls on Friday. The week isn’t over yet.
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