Recession, Mixed outlooks, and expectations!
The latest data from different economies confirm that recession evidence piles up globally. After weak data seen in Asian and European economies yesterday, the August PMI data released by Markit in the United States also performed poorly. Manufacturing PMI hit a new low since July 2020, at 51.3, much lower than 52.2 the month earlier. The service sector was worse, with PMI hitting a new low since May 2020, at 44.1, last month, it was 47.3. Add them the Richmond Fed Manufacturing Index that in August was seen at -8, missing market expectations of -4, while previously been at 0.
Overall, the weaker-than-expected performance of both manufacturing and service PMIs caused the composite PMI to fall to a 27-month low of 45.0 from the previous value of 47.7. The current US composite PMI index had the worst performer among developed economies.
In response to these published data, local agencies blame supply chain issues and higher prices. At the same time, some optimistic investors believe that outlook is positive for next year as inflation decreases, supply chain issues will be solved, and the economy can start its recovery.
After the data release, the stock market reacted positively as expectations of stricter policies were reduced. However, when Kashkari said that Fed would stick to its pace of interest rate hikes this year because inflation is still so high, the market's trend reversed.
Besides all economic data, reports from China about energy shortage and electric cuts increased the risks. China is facing a severe heat wave that dried up many rivers which supply water to hydropower plants. Many factories in Sichuan province were shut down last week amid a power crunch.
Focus now turns to Jackson Hole Symposium that starts tomorrow for three days. FED Chairman Mr. Powell will speak on Friday, and it will be very important for market participants as it is expected to provide more cues on the Fed's plan to tighten monetary policy.
Yesterday, Nasdaq composite close flat, Dow Jones Industrial Average lost 0.22%, and SP500 ended 0.47% lower. Wednesday, while at the first hours, yesterday's decline continued, now they are back to the open levels and trading so caution and flat, waiting for more updates and signs to decide where to go. Overall, market sentiment is negative now. However, everything will be more transparent with the FOMC member's speech, especially Mr. Powell's Friday comment.
