August 2024 official Chinese PMIs from the National Bureau of Statistics (NBS):

Composite is 50.1

• prior50.2

August Manufacturing PMI 49.1

• expected 49.5, prior49.4

Services 50.3

• expected 50.0, prior 50.2

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The Chinese economy has been showing, and continues to show, a patchy and uneven recovery. Key trouble spots include:

• an uncertain property sector outlook, the sector is mired in debt
• subdued consumer confidence and demand
• manufacturing overcapacity in some sectors
• still below target underlying inflation (impacting this are the above points on weak domestic demand and supply overcapacity)
• on the horizon are potentially higher tariffs on Chinese exports

Authorities have been lobbing targetted support at the economy, in a piecemeal fashion. There is still plenty of work to do.

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China has two primary Purchasing Managers‘ Index (PMI) surveys – the official PMI released by the National Bureau of Statistics (NBS) and the Caixin China PMI published by the media company Caixin and research firm Markit / S&P Global.

• The official PMI survey covers large and state-owned companies, while the Caixin PMI survey covers small and medium-sized enterprises. As a result, the Caixin PMI is considered to be a more reliable indicator of the performance of China’s private sector.
• Another difference between the two surveys is their methodology. The Caixin PMI survey uses a broader sample of companies than the official survey.
• Despite these differences, the two surveys often provide similar readings on China’s manufacturing sector.
• The Caixin manufacturing PMI will follow on Monday, services on Wednesday

This article was written by Eamonn Sheridan at www.forexlive.com.

• US July core PCE +2.6% y/y vs +2.7% expected
• OPEC+ is likely to proceed with a planned gradual production increase from Oct — report
• US August UMich final consumer sentiment 67.9 vs 68.0 expected
• Canada Q2 GDP +2.1% q/q annualized vs +1.6% expected
• Dallas Fed trimmed mean PCE price index for July 1.7% versus 1.8% in June
• US weekly Baker Hughes oil rig count unchanged at 483
• US dollar specs turn short for the first time since February
• ECB’s Villeroy: It would be fair and wise to cut rates in Sept
• Goldman Sachs workers face the annual cull

Markets:

• Gold down $19 to $2501
• WTI crude oil down $2.47 to $73.44
• US 10-year yields up 4.3 bps to 3.81%
• S&P 500 up 0.6%
• USD leads, JPY lags.

It was tough to tie the fundamentals to the market moves today, as is often the case at month end. Tokyo CPI was hot earlier and US PCE was a tad cool and normally that’s the recipe for a USD/JPY decline but it was just the opposite as the pair climbed 116 pips in a steady rally that started in Europe and never eased.

That was part of broad bids in the US dollar that were supported somewhat by rising Treasury yields. However the 30 pip decline in the Australian dollar certainly went against the rip in equities.

The Canadian dollar was particularly volatile and rallied initially on a strong GDP number. However the details of that report showed no growth in June and July plus the vast majority of the growth in the quarter was driven by government spending. That led to a rethink, particularly following the drop in oil prices. All told, there were four 30-pip straight line moves in USD/CAD trading to round out a lively month. That will give North Americans plenty to digest over the long weekend.

The euro finishes the month above 1.10, which is a nice victory but a cent-and-a-half from Monday’s high of 1.1201. It declined in four of the five days this week in a setback after three weeks of strong gains.

Similarly, cable fell for the third consecutive day and showed few signs of life in month end trade.

On net, the US dollar rebound balances the market heading into what’s going to be a lively September. Have a great weekend.

Justin and Eamonn will be back next week.

This article was written by Adam Button at www.forexlive.com.

There was no lack of drama in the final day of equity trading in what was a wild ride in August. The S&P 500 opened strongly and then gave it all back to trade in negative territory at midday. However some steady bids emerged in the afternoon before a massive wave of buying late.

Much of it was likely technical into a month-end long weekend but it wraps a bow on a lively one.

• S&P 500 1.0%
• Nasdaq Comp +1.1%
• DJIA +0.6%
• Russell 2000 +0.3%
• Toronto TSX Comp +0.2%

On the week:

• S&P 500 +0.25%
• Nasdaq Comp -0.9%
• Russell 2000 -0.4%
• Toronto TSX Comp -0.1%

On the month:

• S&P 500 +2.3%
• Nasdaq Comp +0.6%
• DJIA +1.8%
• Russell 2000 -2.0%
• Toronto TSX Comp +0.6%

Those monthly numbers aren’t impressive at first blush but they come after massive selling at the outset.

The Nasdaq Composite monthly chart now shows a double doji. That’s a setup for a big move to come. Given the impressive recovery from the August declines, I’ll take the upside but it’s tough to have confidence after the Nvidia decline and with a negative September seasonal backdrop.

This article was written by Adam Button at www.forexlive.com.

The main driver of US dollar strength over the past number of years was ‚US exceptionalism‘. That’s meant stronger growth and higher US interest rates.

The stronger growth narrative is still in place — even if it requires a deficit at 7% of GDP — but Fed Chairman Jerome Powell has deconstructed the second part of narrative. His comments suggest the Fed won’t tolerate a rise above 4.4% and that the FOMC plans to cut rates even with strong growth.

That’s prompted a re-think in the market and some broad softening of the US dollar (at least until today).

This article was written by Adam Button at www.forexlive.com.

Goldman Sachs plans to layoff 3-4% of its workforce or between 1300 and 1800 people, according to the WSJ.

This shouldn’t come as a surprise as the company trims 2-7% of its workforce annually on performance factors. The layoffs have started and will continue through the autumn.

The cutthroat culture finally appears to be making shareholders money after trading virtually flat from 2018 to early this year.

This article was written by Adam Button at www.forexlive.com.