The S&P 500 closed at a new record high on Tuesday and UK and European markets have opened higher this morning despite data showing that inflation turned negative last month in Europe.
- The Eurozone consumer prices are expected to fall 0.2 percent from a year earlier in August 2020, the first decline since May 2016 and well below market expectations of a 0.2 percent rise, a preliminary estimate showed. Prices should fall for both energy products (-7.8 percent vs -8.4 percent in July) and non-energy industrial goods (-0.1 percent vs 1.6 percent). At the same time, inflation is set to slow for services (0.7 percent vs 0.9 percent) and food, alcohol & tobacco (1.7 percent vs 2.0 percent). The annual core inflation, which excludes volatile prices of energy, food, alcohol & tobacco and at which the ECB looks in its policy decisions, is likely to ease further to 0.4 percent, the lowest on record and below forecasts of 0.8 percent.
- Construction spending in the US increased 0.1 percent from the previous month to a seasonally adjusted annual rate of USD 1.365 trillion in July of 2020, recovering from a downwardly revised 0.5 percent fall in June and well below market expectations of a 1.0 percent growth. Still, it was the first gain in construction spending since February. Spending on private construction rose 0.6 percent led by increases in residential (2.1 percent), transportation (3.2 percent), communication (1.2 percent) and manufacturing (0.2 percent). On the other hand, public outlays fell 1.3 percent mainly due to non-residential (-1.3 percent).
- The ISM Manufacturing PMI for the United States increased to 56 in August of 2020 from 54.2 in July, beating market forecasts of 54.5. The reading pointed to the biggest expansion in the manufacturing sector since November of 2018 as August was the first full month of operations after supply chains restarted and adjustments were made for employees to return to work. The new orders subindex reached the highest since December of 2017 (67.6 vs 61.5) and production (63.3 vs 62.1), backlogs of orders (54.6 vs 51.8) and export orders (53.3 vs 50.4) went up faster. Also, employment fell at a slower pace (46.4 vs 44.3) and price pressures were the strongest since November of 2018 (59.5 vs 53.2) while inventories fell more (44.4 vs 47). Of the 18 manufacturing industries, 15 reported growth in August. Also, sentiment was generally optimistic.
- The IHS Markit US Manufacturing PMI was revised lower to 53.1 in August of 2020 from a preliminary of 53.6. Still, the reading pointed to the strongest expansion in factory activity since January of 2019, following the easing of coronavirus restrictions and the reopening of large sections of the manufacturing sector. New orders increased the most since the start of 2019, due to stronger client demand and increased marketing. New export orders grew the most in four years, as companies registered the first upturn in foreign client demand in 2020 so far and output growth was the quickest since November 2019. At the same time, employment increased the first time since February. Meanwhile, input price inflation accelerated, amid raw material shortages and supplier price hikes. Finally, business confidence was the strongest since April of 2019 amid hopes of a return to stronger demand conditions and an end to the pandemic.
- On Tuesday: European stocks turned in a mixed performance on Tuesday with investors reacting to a slew of economic data from across the globe. After a positive start on the back of upbeat factory data from China and hopes about likely approvals to vaccines developed by Pfizer and BioNTech, as well as AstraZeneca, most of the markets turned a bit easy and pared early gains. US stocks ended mostly higher, with Nasdaq and S&P 500 reaching new record closing highs. Technology stocks saw continued strength on the day, with Apple (AAPL) helping to lead the sector higher after yesterday’s stock split. Asian stocks ended mixed as concerns about rising coronavirus cases and geopolitical tensions offset data showing that China’s manufacturing sector continued to expand in August.
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