This week’s key events include a host of PMI prints (Mon), the eurozone inflation reading (Tue) and the US employment report (Fri). Today UK housing data will garner market attention while US markets are shut for the Labour Day holiday. US construction spending ISM manufacturing, and S&P Global manufacturing PMI are due on Tuesday. The China RatingDog services PMI, Eurozone PPI and US mortgage applications, job openings and factory orders will be released on Wednesday. We also have the Fed’s Beige Book and will hear from the ECB’s Lagarde, BoE’s Mann and Breeden and the Fed’s Musalem. Eurozone retail sales, and US trade initial jobless claims, ADP employment and ISM services are out on Thursday. Fed chatter comes from Williams and Goolsbee. Eurozone GDP, Germany factory orders, UK retail sales and US non farm payroll stake centre stage on Friday.
A mixed week for asset classes saw the yield on the 10-year UST fall 3bps to 4.23%. After reaching new highs with minimal volatility US equities capitulated just before the Labor Day holiday weekend, primarily driven by the tech stocks. Meanwhile, the dollar was marginally unchanged given the in-line with expectation PCE figures, and Brent crude rose to $68.12pb.
We heard some dovish comments from the Fed including Waller who said the case for cutting rates last month “is even stronger today” given “the downside risks to the labour market have increased.” The Fed’s favoured inflation reading, the core PCE price index, rose 0.3%mom in July, to 2.9%yoy. The Uni. of Michigan sentiment remained subdued, while the inflation forecasts eased to 4.8% for 1-year and 3.5% for the 5-10 year. Ahead of that, the second reading for growth rose to 3.3%qoq, with personal consumption also revised marginally higher.
Separately, a federal court ruled that Trump’s tariffs were illegally imposed. This came as a separate legal battle over his attempt to remove Fed Governor Cook remained unresolved.
Elsewhere, Chinese industrial companies saw their profits fall at a slower rate in July, indicating that government efforts to curb overcapacity and aggressive competition may be starting to work. Profits for the sector declined by just 1.5%yoy, the smallest drop since May. The manufacturing sector witnessed a significant rebound with profits growing 6.8% in July. Over the weekend, China’s official manufacturing PMI remained in contraction territory at 49.4 in August, a slight improvement from July’s 49.3. However, the non-manufacturing PMI rose from 50.1 to 50.3, pushing the composite PMI to 50.5. In contrast to the official figures, this morning’s RatingDog (S&P Global) China PMI manufacturing rose into expansion in August.
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