Australia's Central Bank Has Raised Its Interest Rate. Business Activity In Europe Is Falling

According to the latest ISM report, economic activity in the US manufacturing sector rose in July, with the economy posting its 26th consecutive month of growth. But it should be noted that there is a downward trend in growth, and the PMI indicator is approaching the level of 50. Going below 50 is usually a harbinger of recession.

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At the close of trading yesterday, the Dow Jones (US30) decreased by 0.14%, and the S&P 500 (US500) lost 1.28%. The Nasdaq Technology Index (US100) was down by 1.13% on Monday.

Twitter (TWTR) lost about 2%, even as Greenlight Capital announced a new stake in the social media giant, betting that the latter will emerge victorious in a legal battle with Elon Musk to force the billionaire to fulfill his $44 billion deal. Boeing (BA) shares jumped by 6% after reports that the Federal Aviation Administration cleared the maker to resume delivery of the 787 Dreamliner.

Companies reporting today include AMD (AMD), Caterpillar (CAT), PayPal Holdings Inc (PYPL), Starbucks (SBUX), Gilead (GILD), Airbnb (ABNB), Marriott Int (MAR), Uber Tech (UBER), Ferrari NV (RACE), Electronic Arts (EA), and others.

On the political front, US House Speaker Nancy Pelosi is expected to visit Taiwan as part of her tour of Asia, despite hostile threats from China. This adds significantly to the nervousness in the financial markets.

Stock markets in Europe were mostly down on Monday. German DAX (DE30) decreased by 0.03%, French CAC 40 (FR40) lost 0.18%, Spanish IBEX 35 (ES35) was 0.87% lower, British FTSE 100 (UK100) was 0.13% lower.

European manufacturing PMI dipped below the level of 50 in July. This usually means that a country is approaching a recession. It is a preliminary and rough indicator, but the statistics show that a drop of 50 triggers recessive processes in the country. The Central Bank has begun to work toward easing monetary policy. In Spain, the Index fell from 52.6 to 48.7, Italy from 50.9 to 48.5, France from 49.6 to 49.5, Germany from 52 to 49.3, and the overall Eurozone PMI fell from 52.1 to 49.8. With the ECB just starting to tighten monetary policy and raise interest rates, Europe will slowly deepen into recession. Winter will not be easy for Europe.

Oil is down nearly 5% due to negative Chinese data. Chinese factory activity declined in July amid new blockages related to COVID. China is the world's largest importer of crude oil. OPEC+, Organization of Petroleum Exporting Countries, will meet Wednesday to decide on September production quotas for the group's members. Analysts believe that OPEC+, which includes 23 countries, will likely leave production unchanged and only raise it slightly in September. Most importantly, OPEC+ should not cut production at this point.

Asian markets traded flat yesterday. Japan's Nikkei 225 (JP225) gained 0.69%, Hong Kong's Hang Seng (HK50) ended down by 0.05%, while Australia's S&P/ASX 200 (AU200) was up by 0.69%.

Australia's Central Bank raised its interest rate by 50 basis points to 1.85% and noted further tightening. The Bank said in a statement that it attaches great importance to getting inflation back into the 2-3 percent range over time while keeping the economy stable. The outlook for global economic growth has been worsened by pressure on real income due to higher inflation, tighter monetary policy in most countries, Russia's invasion of Ukraine, and COVID containment measures in China.

Japan's planned record minimum wage hike paves the way for sustained GDP growth. Japan's average minimum wage is rising at a record pace this year. The government said Tuesday, a positive development for Prime Minister Fumio Kishida's efforts to protect households from global inflation. Kishida expects the increase to contribute to his flagship policy of distributing wealth to the broader population to put Japan's economy on a sustainable recovery path.

S&P 500 (F) (US500) 4,118.63 −11.66 (−0.28%)

Dow Jones (US30) 32,798.40 −46.73 (−0.14%)

DAX (DE40) 13,479.63 −4.42 (−0.033%)

FTSE 100 (UK100) 7,413.42 −10.01 (−0.13%)

USD Index 105.41 −0.49 (−0.47%)

Important events for today:

  • – Australia RBA Interest Rate Decision (m/m) at 07:30 (GMT+3);
  • – Australia RBA Rate Statement (m/m) at 07:30 (GMT+3);
  • – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3).

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Disclosure: This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, ...

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