Daily Digest: Monday 23rd September
USA
Monday marked the release of flash PMI (purchasing managers index) data for US, Eurozone, and UK during the month of August. PMI figures are a proxy for the wider health of an economy, measured separately across the services and manufacturing sectors. PMI is calculated on the basis of several data points including industry inventory levels, alongside production output, and new product and services orders/contracts. PMI is measured on a scale of 0 to 100, 50 signals no change in industry performance whilst any figures >50 signal sector growth and any figures <50 signal a contraction in performance.
US flash manufacturing PMI figures for August came in at 47, 1.6 points below analyst expectation of 48.6. This implies that manufacturing sector performance through August was weaker than that of July, albeit performance declines are relatively small. Provisionally, this print marks a second consecutive month of reduced manufacturing sector performance. At the firm level, a continuation of this trend could negatively impact the quarterly financial results, threatening stock prices, reducing the attractiveness of the firms to value investors, and hampering firm efforts to raise debt financing. In terms of macroeconomics, US GDP is heavily weighted toward the service sector, a reduction in manufacturing output is unlikely to significantly affect wider economic performance. However, once again, if the trend continues there may be implications for GDP performance.
Arguably the more important of the two prints, US services PMI came in at 55.4, 0.1 points above analyst expectations of 55.3. As noted, PMI above 50 signals that sector output or performance is growing, with the print extending a trend of expansion to five months. In terms of markets, due to the composition of US GDP a positive shock in terms of services PMI data should contribute to stronger equity performances, as the print alludes to the wider strength and health of the US economy.
In terms of equities, trader reactions to the day’s data prints were overwhelmingly positive. The S&P 500 ($SPX) rallied, as prices rose 16.02 points (0.28%) to 5,718.57, whilst the Nasdaq 100 ($NDX) rose 60.71 points (0.31%) to 19,852.20, and the Dow ($INDU) rose 61.29 points (0.15%) to 42,124.65.
Europe
Both UK manufacturing and Service PMI data for August came in above the 50 point benchmark implying the wider performance of the UK strengthened. Manufacturing PMI came in at 51.5, just below analyst expectations whilst Services PMI came in at 52.8, 0.7 points below expectations. Services and manufacturing are the two largest contributors toward the UK’s economic performance, meaning on a macro level, output expansion is regarded as a positive indicator of economic health. Once again, market reactions were generally positive, despite growth underperforming analyst estimates. The FTSE 100 (FTSE), the UK’s benchmark equity index rose 29.72 points (0.36%) to 8,259.71, as traders pushed prices toward key levels of resistance tested last week.
In terms of mainland Europe, Eurozone manufacturing PMI data came in at 44.8, below analyst expectations, signalling industrial decline was faster than anticipated during August. Furthermore, services PMI came in at 50.5 against estimates of 52.3, with service sector performance disappointing markets.
Rest of the World
Japanese markets remained closed on Monday as the nation observed Autumn Equinox day celebrations. As traders return to their desks on Tuesday, the Nikkei 225 (¥N225) will open the session at Friday’s closing price of 37,723.91. Across in China, the Shanghai Composite index (¥SSE) continued to trade higher as investors pushed prices a further 12.1 points higher to 2,748.92.
What to Watch Tomorrow
Japanese Flash Manufacturing PMI
Fannie Mae and Freddie Mac HPI
Sources:
https://uk.finance.yahoo.com/world-indices/
https://uk.finance.yahoo.com/commodities
https://www.londonstockexchange.com/indices/ftse-100
https://www.binance.com/en-GB/price/bitcoin
https://www.binance.com/en-GB/price/ethereum
https://qontigo.com/index/sxxp/
Stock Market Activity Today & Latest Stock Market Trends | Nasdaq
https://coinmarketcap.com/charts/#market-cap
https://www.forexfactory.com
Definitions:
YoY - Year on Year, or, Year over Year
MoM - Month on Month, or, Month over Month
QoQ - Quarter on Quarter, or, Quarter over Quarter
ECB - European Central Bank
BOJ - Bank of Japan
Fed - Federal Reserve
BOE - Bank of England
SNB - Swiss National Bank
DOJ - Department of Justice