US manufacturing PMI rises in August

US private sector activity, as measured by the August flash composite PMI, rose marginally in August, with the headline index increasing to a value of 55.4 from 55.1 in July. There was a notable rise in the manufacturing component, which rose to its highest level since May 2022, increasing to a value of 53.3 after dropping below the neutral-50 mark the month prior. Companies reported both stronger demand and a rising backlog of orders, suggesting that they were struggling to meet demand. This appears to be filtering into sales prices, which rose to a three-year high. The services component fell slightly, dropping to 55.4.

Initial jobless claims in the US rose to 235k, an 11k jump, in the week ending 16 August. While the increase was above consensus expectations, it appears the move was at least in part due to seasonal factors, rather than a sustained increase in layoffs. That said, continuing claims for the week ending August 9 rose by 30k to 1.97m, suggesting that those workers who have lost their jobs are finding it harder to find new employment opportunities.

The provisional Eurozone composite PMI rose to 51.1 in August from 50.9 in July. There was a small deterioration in the services component, which was more than offset by a rise in the manufacturing component to a value of 50.5 from 49.8 in July. There were improvements in both the French and German composite PMI measures, also both driven by rises in manufacturing activity. The input price component rose sharply in the August print, increasing to 56.5 from 54.9, although output prices remained broadly unchanged.

There was a robust rise in the August flash UK composite PMI, increasing to a better-than-expected value of 53.0 from 51.5. The improvement was down to a rise in the services component, which increased to 53.6 from 51.8 in July. The manufacturing component fell further into contractionary territory, declining to 47.3 from 48.0.

Japanese consumer price inflation fell to 3.1% y/y in July, down from 3.3% in June. Underlying price pressures still look sticky, with inflation excluding food and energy remaining unchanged at 3.4% y/y. The figures remain supportive of gradual rate hikes by the BOJ.

Today’s Economic Data and Events

• 18:00 Fed Chair Powell speaks at Jackson Hole symposium

Fixed Income

• US Treasury yields rose on Thursday, following the better-than-expected PMI print. Both 2yr and 10yr yields rose around 4bps to 3.7918% and 4.3277%, respectively. Investors will be looking to Powell’s speech at Jackson Hole today for further guidance on the path of monetary policy.
• European bond yields rose on Thursday. The 10yr Gilt gained 6bps to 4.727%, while the 10yr Bund gained 4bps to reach 2.755%.

FX

• The dollar strengthened against a basket of peer currencies on Thursday, with the spot index gaining 0.4%, driven by the stronger PMI numbers. EURUSD fell 0.4% to reach 1.1606, USDJPY rose 0.7% to 148.37, USDCHF increased by 0.6% to 0.8087 and GBPUSD fell 0.3% to 1.3412.
• In emerging markets, USDTRY held fairly steady at 40.9375, while USDINR rose 0.2% to 87.2612.

Equities

• US equity markets fell on the back of a lower-than-expected profit announcement from Walmart. Both the Dow Jones and the NASDAQ fell 0.3%, while the S&P 500 declined by 0.4%.
• European equity markets were mixed on Thursday. The EuroStoxx 50 fell 0.2%, and the CAC 40 declined by 0.4%. The Dax rose 0.1% and the FTSE 100 gained 0.2%.
• Moves in local markets were muted, with the DFM gaining 0.1% and the ADX falling by less than 0.1%. The Tadawul fell 0.1%.

Commodities

• Oil prices rose for a second consecutive day on Thursday. Brent futures rose by 1.2% to USD 67.67/b while WTI gained 0.5% to USD 63.52/b.
• Gold prices fell by 0.3% to USD 3,338.71/troy oz.