European PMIs Weak
The U.S. dollar index advanced to its highest level since early March. The bullish influence of the ongoing hawkish Federal Reserve more than offset the undermining influence of U.S. labor strike activity.
In the longer term, interest rate differential expectations remain favorable for the greenback, since the U.S. economy appears to be holding up relatively well compared to economies elsewhere.
The euro currency extended losses towards the $1.06 level, falling its lowest level since March, following the release of disappointing PMI data.
The HCOB German Flash Composite Purchasing Managers’ Index, increased to 46.2 in September from August’s 44.6, but came in under 47.2 that was predicted by economists. The indicator was below the 50 level, which suggests a contraction in business activity.
The S&P Global/CIPS U.K. Composite PMI fell to 46.8 in September 2023, which is down from 48.6 in August and below the market consensus of 48.7.
The Bank of Japan maintained its key short-term interest rate at -0.1% and that of 10-year bond yields at around 0% at its policy meeting today by a unanimous vote. Japan has had negative interest rates since early 2016.
The annual inflation rate in Japan edged down to 3.2% in August 2023 from 3.3% in July.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index fell to a seasonally adjusted 48.6 in September from 49.6 in August.
STOCK INDEX FUTURES
Stock index futures declined Wednesday and Thursday due to the hawkish tone to the Federal Open Market Committee’s policy statement, U.S. labor strike activity and debt ceiling issues.
There is some recovery today.
The 8:45 central time September PMI composite is expected to be 47.8.
Stock index futures are oversold at these levels.
INTEREST RATE MARKET FUTURES
After price declines this week, futures are mostly higher. The bearish influence of ongoing hawkish Federal Reserve officials may be partially offset by the bullish influence of the possibility of increased U.S. labor strike activity.
Mary Daly of the Federal Reserve will speak at 12:00.
Financial futures markets are predicting there is a 73% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and a 27% probability of a 25 basis point increase at its November 1 policy meeting.
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