- Key US economic data ahead
- Sentiment in Europe deteriorates
- Weak data from Japan, Chinese PMI ticks up
Europe – PMIs plummet, sentiment dives
Last week began with flash EMU PMIs that showed very concerning state of the economy, especially German manufacturing. In the previous update we concluded that this increased the recession risk as manufacturing slowdown lasts long enough to affect broader economy. Sentiment indicators released by the European Commission seem to confirm this. Although sentiment in services inched up from multiyear lows in September, overall business climate plunged to a fresh multiyear low of -0.22. We have France calling for fiscal impulse but a) 10 billion euro wouldn’t do much and seems to mostly placate yellow vests and b) Germany has so far resisted calls for more ambitious package. Furthermore, flash inflation data for September shows further disappointment. This week will be interesting for the UK where the fortune has reversed for the pound.
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EURUSD plunged to 2019 low last week amid depressing eco-data and there’s no reversal in sight. Source: xStation5
Key economic event this week: UK manufacturing PMI (Tuesday, 9:30am BST)
US – rising inflation can complicate things for the Fed
Another week of mixed prints from the US. It was started with a small pick-up in the Markit PMIs but those still remained at a subdued levels close to 51 points. Consumer confidence reports converged a bit with Conference Board seeing a major dive but from cycle highs and UoM report inching up (this report saw declines in sentiment before). Overall consumer sentiment remains fairly strong but personal spending was weaker than expected and although durable goods orders were higher, annual growth remains non-existent. One thing that stands out is a pick up in core inflation. We pointed at it before in case of CPI, now it’s been confirmed by PCE and Q2 GDP deflator. Higher inflation will make it harder for the Fed to justify further easing unless the economic picture deteriorates. So that seems to be indices negative. This week will be really interesting with ISM surveys (especially the non-manufacturing one that still shows levels MUCH higher than Markit PMI) and the NFP on Friday. While Europe and Asia are clearly struggling the judge is still out for the US.
September was the weakest month for the NFP between 2011 and 2018. Source: Macrobond, XTB Research
Key economic event this week: NFP report (Friday, 1:30pm BST), ISM indices (Tuesday and Thursday, 3pm BST)
Asia – Chinese PMI inches up
The Chinese Markit manufacturing PMI rose to 51.4 pts. in September – the highest level since March 2018. It’s unclear to what extend it were purchases ahead of the 70th anniversary of PRC but it’s a welcome change and a ray of hope. The data from Japan wasn’t particularly encouraging though. The manufacturing PMI slid to 48.9 points and remained below the 50 line for the 5th straight month and inflation prints (both headline and core) were below expectations, increasing odds of more BoJ easing (that failed to produce a sustained recovery).
JAP225 has been struggling lately following a brisk rally. Can we see a repeat from May when it led to a sharp correction? Source: xStation5
Key economic event this week: Korean manufacturing PMI (Tuesday, 3:30am BST)
