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PMI numbers keep slipping

Edward Bell - Senior Director, Market Economics
Published Date: 02 August 2022


  • The US ISM manufacturing index dropped in July to 52.8 from 53 a month earlier, helping to assuage some fear that the US would extend its contraction in to Q3. New orders though did remain below the 50 level separating expansion and contraction and many subcomponents suggest that the economy is still far from robust health, even as the employment component actually improved.
  • India’s manufacturing PMI improved in July, rising to 56.4 from 53.9 in June and hitting its best level since November last year. Output was up strongly to 59.6 while new orders also picked up. India’s economy appears to be weathering the impact of high inflation and a weaker currency relatively well so far even as the rupee has depreciated more than 6% against the dollar this year. The currency has started to improve in the last few weeks and market expectations are for another hike from the RBI later this week.
  • In Turkey, the manufacturing PMI dropped to 46.9 in July from 48.1 a month earlier and its fifth month in a row below the 50 level demarcating expansion and contraction. New orders fell to 43.6 as the investment outlook in the country remains challenged by high levels of inflation and exposure to high global commodity costs, particularly for energy and agricultural products. Inflation numbers will be published on August 3rd, with market expectations that it will rise to 80.3% y/y.

Today’s Economic Data and Events

  • 08:30 AU RBA cash rate target: forecast 1.85%
  • 18:00 US JOLTS job openings Jun: 11m

Fixed Income

  • US Treasuries benefitted from a risk-off rally, spurred by geopolitical fears as Nancy Pelosi, speaker of the House of Representatives, may visit Taiwan and risk angering China. Yields on the 2yr UST dropped by a bit more than 1bps to 2.8701% and have extended their move lower today while the 10yr UST yield dropped 8bps to 2.5732% is still falling in trade this morning.
  • European bond markets also closed higher with the 10yr bund yields down about 4bps to 0.773% while the 10yr gilt yield fell almost 6bps to 1.802%. A further escalation of geopolitical risk will likely worsen global economic conditions that are already far from healthy.
  • Emerging market bonds closed mixed with South African 10yr yields up 10bps to 10.864% while the yield on 10yr Turkish bonds dropped 9bps to 16.97%.
  • Fitch affirmed its sovereign rating on Israel at ‘A+’ with a stable outlook.


  • The dollar dropped for the first day of the month as recession and geopolitical risks push back against the market expectations for the pace of Fed hikes. EURUSD managed a gain of 0.4% to 1.0262, a second daily gain in a row, while USDJPY dropped by 1.2%, extending gains for the yen after last week’s strong appreciation. GBPUSD added 0.65% to 1.225 overnight.
  • Commodity currencies were mixed with USDCAD rising by 0.4% to 1.2844 as oil’s beta to recession risks could leave Canada acutely exposed. AUDUSD added 0.5% to 0.7023 but it has fallen back ahead of today’s RBA meeting while NZDUSD gained 0.8% to 0.6331.


  • Equity markets settled lower overnight as recession and geopolitical fears weighed on markets. The Dow Jones fell by 0.14% while the S&P 500 gave up 0.3% and the NASDAQ settled lower by about 0.2%. In Europe, the EuroStoxx 50 closed roughly flat while the FTSE fell by a bit more than 0.1%.
  • Asian markets are broadly lower in trade today with the Nikkei down by 1.5% and the Hang Seng falling as much as 2.5% as Nancy Pelosi visits the region.


  • Oil prices plummeted on the start of a new trading month with October Brent down about 4% to USD 100.03/b and pushing lower in trade today. WTI fell by 4.8% to USD 93.89/b as recession fears continue to drag on the market. The OPEC+ meeting tomorrow will be the focus for oil markets and whether the producers’ alliance will respond to requests for higher oil output.

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