Spreadex Market Update
Dismal Set of PMI Readings Raises Recession Fears & Stalls USD Rally
The latest round of PMI readings out of the US, UK and Eurozone yesterday made for pretty grim reading. Factory and non-factory sector surveys across the board were seen plunging into negative territory, or undershooting expectations. Among the weakest of the readings was UK manufacturing, which fell to 46 from 52.1 and US services which fell to 44.1 from 47.3. These latest readings highlights an acceleration of the downward trend which we’ve seen this year and raise serious questions over the global economic outlook across the remainder of 2022.
Key Factors for Today
- USD stalls at highs following weak PMI readings
- Equities tank as dim PMI readings raise global recession fears
- GBP & CAD rally in FX, taking advantage of USD weakness
- Quiet trading expected ahead of Jackson Hole tomorrow
- Oil rallies on OPEC news and USD weakness
Coming Up
- USD US Durable goods
- EUR US Pending home sales
- NZD New Zealand Retail sales
Equities Lower On Weak PMI Readings
It was another day of selling across the board in equities markets yesterday. The reaction to a dismal set of PMI readings saw major indices tanking as recession fears kicked in. Markets appear to be looking beyond the idea of a slower pace of central bank tightening, given still soaring inflation and are instead focusing on which economies seem most vulnerable. The prevailing view currently is that the economic outlook is worse for the UK and Europe than it is for the US and Asia due to the specific impact of the Russia-Ukraine war. The ongoing surge in gas prices is one prime example of this.
Fresh China Lockdowns Add to Bearish Picture
Risk markets are also under pressure from news of another lockdown announced in China overnight. A city outside of Beijing has had fresh measures implemented as the country continues with its zero COVID policy. With the economy still reeling from major lockdowns earlier in the year, there are fears that further lockdowns will be implemented across year-end, putting additional downward pressure on the economy.
GBP & CAD Bounce Back As USD Slips
yesterday helped further the rally, with traders now awaiting the latest EIA release later
today, forecast to show a 2.4 million barrel drawdown.
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