Thoughts on the Markets

Well it’s been an interesting week. The HSBC Flash China Manufacturing PMI came in at 48.1 for June down from 48.4 in the previous month. So the Official PMI, which is government backed and looks at the big corporations is in the expansion zone whilst the HSBC Flash PMI, a private sector survey of SME’s is in a contracting phase. Which number to believe? I know which number I trust. Indeed the US ISM came in below 50 at 49.7. That was a surprise to the market and the New Orders part of the survey also came in very disappointing. This is also the first time the ISM has come below 50 since July 2009 (34 months). Being a leading indicator it will be interesting to see what the number is for July. If it comes in below 50 again the that could signal a potential recession in the USA within 12-18 months and a market collapse as the ISM is a powerful leading indicator to the business cycle. Also the Non-Farm Payrolls number of 80,000 came in below expectations of 100,000. Private payrolls were worse at the 84,000 level which was below a consensus of 106,000. The Unemployment rate was at 8.2% which was in line with expectations. The US Market was looking to this number for confidence but due to missing expectations the market sold off. It’s still looking stable but that has been due to the out performance of the defensives sector in holding up the market.  The worst news is that the number doesn’t look that bad to warrant more QE. So in conclusion there looks to be a global slowdown in manufacturing which doesn’t look positive for the global economy. On a final note the last time a Britain was in a Wimbledon Final (which was 74 years ago) we were in a global depression. Now that is something to think about!