Eurozone PMI points to contraction in private sector activity

The advance release of the HCOB Eurozone composite PMI fell sharply in September, declining below the neutral-50 mark for the first time since February, to a value of 48.9 from 51.0 the month prior. While there were falls in both the manufacturing and services sub-indices, the fall in the latter was particularly pronounced. The services index fell 2.4 points to a value of 50.5, while the manufacturing index declined to a value of 44.8 from 45.8 in August. On a country basis, there were falls in both the French and German composite PMI readings in September, with both indices below 50.

The S&P UK composite PMI fell by more than expected in September, declining to a value of 52.9 from 53.8 in August. The drop in the headline index was driven by similar sized falls in both the services and manufacturing components. Encouragingly for the BoE, the PMI measure of output price growth slowed to its lowest level since early 2021, with services inflation being the primary source of slower price growth.

There was a marginal fall in the September flash release of the S&P US composite PMI, which dropped to 54.4 from 54.6. The services sub-component remained in expansionary territory, dipping to 55.4 from 55.7 in August, while the manufacturing index declined to 47.0 in September from 47.9. Despite the headline measure holding up, there was a large drop in the future activity index, suggesting that businesses are becoming more nervous, possibly due to the upcoming election.

The PBOC unleashed a variety of stimulus measures at their meeting this morning, reducing the reserve requirement by 50bps to 9.5%, and cutting the 7-day reverse repo rate to 1.5% (from 1.7%). The central bank also announced plans to bolster the ailing housing market by reducing mortgage rates for existing homeowners.

Today’s Economic Data and Events

• 12:00 GE IFO business climate (Sept). Forecast: 86
• 18:00 US Conference Board leading index (Sept). Forecast: 104

Fixed Income

• US treasury yields were broadly flat on Monday, despite dovish comments from several Fed speakers over the course of the day. The 2yr yield fell by less than 1bps to 3.5866%, and the 10yr yield gained less than 1bps to reach 3.7489%.
• Bond yields were weaker across major European markets, after a weak Eurozone composite PMI print for September. The 10yr Bund yield fell 5bps to 2.155%. The UK Gilt yield, in contrast, rose 2bps to 3.922%.

FX

• Moves against the dollar were once again mixed on Monday. EURUSD declined 0.45% to 1.1111, while GBPUSD rose 0.2% to 1.3347. USDJPY fell 0.17% to 143.61.
• Commodity currencies were broadly stronger against the dollar. Both AUDUSD and NZUSD gained roughly 0.5% to 0.6838 and 0.6267, respectively. USDCAD fell 0.2% to 1.3541.

Equities

• US equity markets were buoyed by comments from Fed officials which were broadly supportive of further rate cuts over the remainder of this year. The Dow Jones gained 0.2%, S&P 500 rose 0.3%, and the NASDAQ increased by 0.14%.
• Major European equity markets also saw gains on Monday, led by automotive and retail stocks. The Eurostoxx 50 rose 0.3%, the CAC 40 gained 0.1% and the DAX increased 0.7%. The FTSE 100 rose 0.3%.
• Locally, the DFM fell 0.05% and the ADX declined 0.04%.

Commodities

• Oil futures fell further on Monday. Brent declined 0.8% to reach USD 73.9/b while WTI dropped 2.16% to USD 70.37/b. Prices have rebounded slightly in early morning trade, driven by increased geo-political tension and news of new stimulus measures announced by the PBOC.