Global markets react to weak US manufacturing data

US manufacturing activity contracts more than expected

The ISM Manufacturing PMI increased slightly to 47.2 in August 2024, up from a low of 46.8 in November 2023. However, this figure fell short of market expectations of 47.5, marking the 21st contraction in US manufacturing activity over the past 22 months. The persistent weakness in the sector underscores the ongoing impact of the Federal Reserve's elevated interest rates on the manufacturing industry.

Brent hits lowest level since December 2023

Brent crude futures have fallen to their lowest levels since mid-December 2023, driven by expectations of subdued demand and relatively ample supply. Recent economic data from China have intensified worries about the global oil market, as indicators of domestic factory demand in one of the world's largest oil-consuming nations declined more sharply than anticipated in August. These developments suggest that a recovery in China's economic growth this year is unlikely.

BoJ Governor Ueda signals potential for further rate hikes

Bank of Japan Governor Kazuo Ueda reaffirmed the central bank's commitment to raising interest rates if economic conditions and inflation trends align with expectations. Speaking to a government panel led by Prime Minister Fumio Kishida, Ueda emphasized that despite the rate hike in July, Japan's economy remains well-supported by the current monetary policy stance, as rates are still substantially negative. Meanwhile, panel members, including business leader Masakazu Tokura, have called for cautious management of macroeconomic policies in light of recent market volatility. This underscores the necessity for coordination between the BoJ and the government to ensure economic stability as the central bank cautiously moves towards a tighter monetary policy.

Swiss inflation eases to 1.1%

Switzerland's consumer price index (CPI) remained flat on a month-over-month basis in August, falling short of expectations for a 0.1% increase. The core CPI, which excludes fresh and seasonal products, energy, and fuel, rose by 0.1% month-over-month. Prices for domestic products were unchanged, while imported product prices declined by 0.1%. On the economic front, Switzerland's GDP expanded by 0.7% quarter-over-quarter in Q2, surpassing the forecasted 0.6% and improving from the 0.5% growth recorded in Q1. This indicates continued solid economic performance, with GDP growing at a steady pace of 0.5% quarter-over-quarter, up from the 0.3% growth rate observed in the previous quarter.