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At the close of the US stock market yesterday, the Dow Jones index (US30) added 0.46%. The S&P 500 Index (US500) increased by 0.30%. The Nasdaq Technology Index (US100) lost 0.26%

The ISM Manufacturing Index was 52.8 in August, unchanged from July and beating the consensus forecast of 51.9. Expectations for a third straight 75 basis point rate hike in the US at the Fed's September 20-21 meeting are rising on solid economic data, with Fed funds futures indicating a 77.1% chance of such an increase. Market attention now turns to the August US Nonfarm Payrolls report, which will be one of the key reports ahead of the Fed meeting. Although the US economy contracted in the first half of the year, the robust labor market defies talk of a recession and encourages the Federal Reserve to keep raising rates.

According to Swiss investment bank UBS, the likelihood of a recession in the US economy over the next year has risen to 60%. Earlier the probability of recession was 40%. Such a forecast was given by the bank based on 3 recession indicators monitored: macroeconomic data, the U.S. Treasury bond yield curve, and credit data.

European stock indices started September weak, falling to a seven-week low amid growing concerns over slowing economic growth, aggressive interest rate hikes, and record-high inflation. German DAX (DE30) fell yesterday by 1.60%, French CAC 40 (FR40) was down by 1.48%, Spanish IBEX 35 (ES35) lost 1.02%, British FTSE 100 (UK100) closed 1.05% lower. Manufacturing activity in the Eurozone declined slightly over the last month, but the decline was mainly due to a sharp drop in activity in Italy. In Germany, France, and Spain manufacturing activity rose in August, but figures are near the median level of 50. German retail sales rose unexpectedly in July, up 1.9% from the previous month, as online retailing and the food sector showed a recovery. Markets are estimating a roughly 80% chance of a 75 basis point rate hike by the European Central Bank next week, up from just over a 50% chance a day earlier.

New lockdowns in China, triggered by COVID-19 concerns, extended the sell-off in oil for a third straight day, increasing the probability that US crude may fall below $85 a barrel for the first time since late January. OPEC+ countries will meet on September 5. If OPEC+ does not announce any cuts at that time, oil prices could continue to fall due to concerns about seasonally weak demand in the fall. Adding to the uncertainty is the resurgence of the US-Iran nuclear deal, which Iran is very much seeking, and Israel strongly opposes. At stake is the potential lifting of US sanctions on Iranian oil, which could add up to a million barrels per day to the global crude oil export market.

Asian markets traded lower yesterday. Japan's Nikkei 225 (JP225) was down by 1.53%, Hong Kong's Hang Seng (HK50) ended the day down by 1.79%, and Australia's S&P/ASX 200 (AU200) closed at 2.02%.

South China's Shenzhen technology center tightened restrictions against COVID-19, as the number of cases continues to rise. Large events and indoor entertainment have been suspended for three days. Manufacturing activity in Asia plummeted in August, as China's COVID-19 restrictions and cost pressures continue to hurt business.

• S&P 500 (F) (US500) 3,966.85 −31.16 (−0.30%)
• Dow Jones (US30) 31,656.42 +145.99 (−0.46%)
• DAX (DE40) 12,630.23 -204.73 (−1.60%)
• FTSE 100 (UK100) 7,148.50 −135.65 (−1.86%)
• USD Index 109.63 +0.93 (+0.86%)
   

Important events for today:

• Switzerland Unemployment Rate (m/m) at 09:30 (GMT+3);
• Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
• US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
• US Unemployment Rate (m/m) at 15:30 (GMT+3).

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