Macro Wrap

The S&P 500 fell 0.9%, the Nasdaq 100 declined 1.7% with a significant drop in tech shares, and the Dow Jones lost 177 points US treasury yields rose 5-7 basis points across the curve, led by the short end, driving a mild flattening of the yield curve. The US dollar had a decent bounce and was flat to higher against every G-10 peer. The DXY index rose from a low of 101.09 to a high of 101.63 before settling around 101.51.

United States: Ahead of Chair Powell’s address to the Jackson Hole Symposium tonight, the odds of a cut of 50 basis points or more rose after July’s employment report showed fewer than expected jobs gains and an unanticipated increase in the unemployment rate, though this pricing has faded as other data points to better growth. Traders are pricing in a 27% probability of a 50 basis point cut next month and a 73% chance of a 25 basis point reduction.

US Initial jobless claims for the week that coincides with the BLS’ August payrolls report, rose to 232k from 228k, as expected, with the four-week average unchanged at 236k. Meanwhile, continued jobless claims rose to 1.863mln (prev. 1.859mln). Focus turns to Chair Powell speaking at the Jackson Hole Symposium today. Sentimentally positive for USD

US S&P Global Flash Manufacturing PMI surprisingly declined to 48.0 (exp. 49.5, prev. 49.6), while Services rose to 55.2 (exp. 54.0) from 55.0, leaving the Composite ticking slightly lower to 54.1 (prev. 54.3), but surpassing the forecasted 53.2. Sentimentally negative for industrial commodities

Eurozone PMI also exhibited similar trends with manufacturing weaker at 45.6 in August from 45.8 with both Germany and France’s at 42.1, but services PMI boosted by France’s coming in at 55 due to the Olympics boost. Eurozone’s services PMI, as a result, rose to 53.3 from 51.9. Sentimentally negative for EURO.

UK PMI offered more good news for the economy with growth remaining strong while price pressures are slowing. Composite PMI rose to 53.4 in August from 52.8 prior with services boosted by a BOE rate cut and coming in at 53.3 from 52.5 and manufacturing also in expansion at 52.5 from 52.1 in July. Sentimentally positive for GBP.