PMI Weakness Spurs Concerns of Recession Looming

The latest financial market updates have cast a shadow of uncertainty as both US and Eurozone PMIs unexpectedly faltered, while Nvidia's earnings exceeded expectations. Amidst these developments, the dollar weakened, gold experienced an upturn, and crude struggled despite a late-session recovery.

Key Factors for Today

• PMIs Show Recession Still on Table with Unexpectedly Weak US and Eurozone Data
• Manufacturing PMI Contraction Raises Recession Concerns; Gold Surges to $1915/oz
• Eurozone Services PMI Falls into Contraction, German Manufacturing Sees Improvement
• WTI Extends 3-Day Losses Despite Larger-than-Expected Stock Drawdown
• Slowing Capital Flows in Japan; USD/JPY Falls due to Weakening Dollar

Market Movers

• The August S&P Global Manufacturing PMI Flash plummeted to 47.0, below the expected 49.0, raising fears of a hard landing.
• Gold surged by 0.95% to $1915/oz, driven by the Manufacturing PMI's negative implications.
• Eurozone Services PMI dropped unexpectedly into contraction at 48.3, dampening sentiments in Europe.
• German manufacturing demonstrated improvement, reaching 43.7 compared to the anticipated 42.7.
• Despite a larger-than-expected stock drawdown, WTI experienced a 3-day losing streak.
• USD/JPY was affected by sluggish capital flows in Japan, compounded by a weaker dollar.

Economic Calendar

• CBI Distributive Trades
• TCMB Interest Rate Decision
• Durable Goods Orders
• Initial Jobless Claims
• Chicago Fed National Activity Index
• Gfk Consumer Confidence
• BRICS Summit
• Jackson Hole Symposium

The Big News

Looming Recession Fears Amplify

The market landscape has been shaken by the unforeseen weakness in the US and Eurozone Purchasing Managers' Index (PMI) data. The August S&P Global Manufacturing PMI Flash revealed a stark decline to 47.0, far from the expected 49.0. This downturn deepens concerns of a looming recession, with the decline in new orders adding weight to the hard landing narrative. This unexpected contraction triggered a surge in demand for safe havens, leading to a 0.95% ascent in gold prices, which soared to $1915/oz. This marks a noteworthy 3-day winning streak for the precious metal, solidifying its position above the $1900/oz support level.

Services PMI Contracts Amidst German Manufacturing Resilience

Across the Atlantic, the Eurozone Services PMI shocked analysts as it dipped into contraction territory at 48.3, contrary to the projected 50.5. This unexpected downturn, the first in 8 months, has dented sentiment in the region. Meanwhile, German manufacturing brought some relief with an improved figure of 43.7, surpassing the expected 42.7. However, this comes with the caveat of remaining in contraction for the 14th consecutive month. The EUR/USD pair managed a modest 0.16% increase, reaching $1.0863, largely due to a weaker dollar. Key support is anticipated at $1.0833, while potential resistance looms at $1.09.

Economic Concerns Deepen WTI's Losses

Despite a larger-than-anticipated drawdown reported by the Department of Energy (DOE), WTI crude oil faced a challenging day. Economic concerns weighed heavily, causing WTI to close 1.30% lower and extending its 3-day losing streak. The near-term support is pegged at $76.85/oz, residing beneath $77.70/oz. An upward movement could fuel speculation of a climb towards $80/bbl.

USD/JPY Hit by Sluggish Movement

Japanese markets experienced a slowing of capital flows, impacting the USD/JPY pair. Net weekly portfolio flows to Japan fell to ¥973.3B from the previous ¥1.4T, with equity outflows surpassing bond inflows. This scenario, coupled with a weaker dollar, drove USD/JPY down by 0.74%. Expected resistance lies at ¥145.90, while support rests around the ¥144 handle should the pair dip below ¥144.52.