September 02, 2022

Daily Report 02/09/2022

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The final reading for the August PMI manufacturing index was revised higher to the 47.3 from the flash reading of 46.0, but still the weakest reading since May 2020. Business optimism was weak, although there was a limited net easing of inflation pressures. Overall confidence in the UK economy continued to deteriorate with fears over a deep recession as household spending comes under sustained pressure. There is speculation that there will be a notable fiscal policy boost following the official appointment of a new Prime Minister next week. There are, however, also fears that an un-funded fiscal boost would further undermine confidence in bonds and trigger further aggressive selling of gilts which would also maintain currency vulnerability.

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The final reading for the Euro-Zone PMI manufacturing index was revised marginally lower to 49.6 from the flash reading of 49.7 with Spanish and Italian sectors both in contraction, although the Spanish data beat expectations. There was an easing of inflation pressures with the rate of increase in output charges at a 16-month low.

The Euro was unable to make any headway after the European open and tended to drift lower despite further speculation that the ECB would sanction a 75 basis-point rate hike at next week’s policy meeting. The dollar maintained a strong overall tone as US yields continued to move higher

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Initial US jobless claims declined to 232,000 in the latest week from a revised 237,000 previously and below consensus forecasts of 248,000. The headline US ISM manufacturing index was unchanged at 52.8 for August and above consensus forecasts of 52.0. The orders component moved back into expansion territory for the month, although production growth slowed to a crawl while inventories posted a smaller decline. Employment also moved back into expansion for the month with a significant net gain which suggested a firm overall jobs market. There was a sharp slowdown in the prices index to 52.5 from 60.0 which was well below expectations and the lowest reading since July 2020.

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13:30 US Nonfarm Payrolls forecast 300k previous 528k