What is global recession? Has it already started? If yes – where are we exactly in this global process? Unfortunately, nobody will tell you that because nobody knows how deep the global recession can be. But there are several reasons why we think it could have already started.
Last week PMIs were being published.
In China, Spain, Switzerland, Italy, Germany, the UK Manufacturing PMIs are lower 50. In Australia it’s just above the crucial level. The last PMI in Canada from Ivey was published lower 49 (the previous fact was 60,6).
Traditionally at the beginning of the month the U.S. ISM counted Manufacturing and Nonmanufacturing PMIs. The facts were poor. Non-manufacturing PMI dropped to 52,6 from 55. Manufacturing PMI from ISM was released at 47,8.
Picture 1. ISM Manufacturing/Nonmanufacturing PMIs
Non-Manufacturing |
Manufacturing | ||||||||
| Index | Series Index Sep | Series Index Aug | Percent Point Change | Direction | Rate of Change | Trend** (Months) | Series Index Sep | Series Index Aug | Percent Point Change |
| NMI®/ PMI® | 52.6 | 56.4 | -3.8 | Growing | Slower | 116 | 47.8 | 49.1 | -1.3 |
| Business Activity/ Production | 55.2 | 61.5 | -6.3 | Growing | Slower | 122 | 47.3 | 49.5 | -2.2 |
| New Orders | 53.7 | 60.3 | -6.6 | Growing | Slower | 122 | 47.3 | 47.2 | +0.1 |
| Employment | 50.4 | 53.1 | -2.7 | Growing | Slower | 67 | 46.3 | 47.4 | -1.1 |
| Supplier Deliveries | 51.0 | 50.5 | +0.5 | Slowing | Faster | 4 | 51.1 | 51.4 | -0.3 |
| Inventories | 53.0 | 55.0 | -2.0 | Growing | Slower | 2 | 46.9 | 49.9 | -3.0 |
| Prices | 60.0 | 58.2 | +1.8 | Increasing | Faster | 28 | 49.7 | 46.0 | +3.7 |
| Backlog of Orders | 54.0 | 49.0 | +5.0 | Growing | From Contracting | 1 | 45.1 | 46.3 | -1.2 |
| New Export Orders | 52.0 | 50.5 | +1.5 | Growing | Faster | 32 | 41.0 | 43.3 | -2.3 |
| Imports | 49.0 | 50.5 | -1.5 | Contracting | From Growing | 1 | 48.1 | 46.0 | +2.1 |
| Inventory Sentiment | 58.0 | 56.0 | +2.0 | Too High | Faster | 267 | N/A | N/A | N/A |
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 45.5 | 44.9 | +0.6 |
| Overall Economy | Growing | Slower | 122 | ||||||
| Non-Manufacturing Sector | Growing | Slower | 116 | ||||||
The markets reacted negatively. Dow Jones dropped lower that 26000 but after a while it recovered in attempt to close the gap down. The yield on 10-year United States treasuries fell down to almost 1,5%.
Meanwhile Gold futures returned back above $1500. The market is in contango now – it means that supply is rising and we may expect that price on Gold will increase again.
Last time when we were discussing EUR/USD, we mentioned that EUR may bounce back before rising. That’s what happened at the beginning of October. On 1-st October the pair reversed and started moving up till it reached the resistance on 1,10000. Right now, EUR is testing the resistance and there is a high probability that the main trend will continue. Linear regression line is heading down.
The resistance line is still on 1,10000; the global target for the price is 1,07700.
