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PMIs paint bleak picture, China offers hope

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By Craig Erlam  

Manufacturing PMIs released throughout Monday made for pretty miserable reading and even those in China barely registered any growth after a lengthy period of contraction.

The Chinese data did offer some cause for hope, at least, despite ultimately barely sitting in growth territory.

The trajectory is positive and boosted by targeted stimulus measures that are seemingly working. External demand remains a problem, but a bump in domestic demand is promising.

The sector in Europe is looking particularly grim with demand remaining extremely weak, backlogs falling and layoffs expected to accelerate over the months ahead.

That’s unless we can see a rebound in activity which is looking very unlikely at this stage, with the world economy struggling for any positive momentum against the backdrop of high interest rates.

The PMIs from the US were a little better, particularly the ISM reading which significantly beat expectation. But even here, it remains below 50 and therefore in contraction territory.

With interest rates set to remain “higher for longer”, things aren’t likely to dramatically improve for the sector.

Volatile start for oil ahead of OPEC+

It’s been a volatile start to the week for oil, with prices initially rising before falling negative to trade almost 2% lower.

We’ve had a vast selection of PMIs to bear in mind today, as well as speculation around the OPEC+ decision on Wednesday and, of course, the US averted a government shutdown.

I’m not sure all of this is a net negative for oil, per se, but it was trading at very high levels prior to this and had already started to lose momentum.

Perhaps what we’re seeing is a case of profit-taking. Especially given the proximity to the OPEC+ meeting.

Higher yields hammering gold

Gold is getting hammered by higher bond yields, with the yellow metal slipping another 1% on Tuesday, weighed down by a stronger dollar.

The next major area of support for gold is around $1,800, but if yields keep rising, that may not put up much of a fight.

Of course, there’s no guarantee we will keep seeing yields rising, but there’s no doubt the recent trend in gold has been extremely bearish and aggressive.

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.