US EARLY MORNING: US index futures start September in the red; NDX pressured as yields rise, news that the US bars AMD/NVDA from selling some tech to China/Russia

SNAPSHOT: US index futures have started the month with losses of 0.5-1.2%, with the duration sensitive Nasdaq-100 leading the downside as Treasury yields climb 5-7bps and the curve bear steepening. Semis are also under pressure after news that the US barred Nvidia (NVDA) and Advanced Micro Devices (AMD) from selling certain products to China and Russia, while the complex is also cognizant of increasing Sino-Taiwan tensions after reports that the Taiwanese have begun shooting at drones said to be from China in recent days. A hawkish monetary policy impulse on the other side of the Atlantic also reminds us that most global central banks will continue to tighten conditions to manage price pressures: many now expect the ECB to lift interest rates by 75bps next week after a wave of hawkish commentary from officials at and after the Jackson Hole Economic Symposium; money markets are now discounting this outcome with a probability greater than 80%, according to Reuters data. That doesn’t appear to be the case in China, however, where authorities have been looking to provide targeted support to vulnerable sectors; the fragility of the world’s second largest economy was impressed in Caixin PMI data released overnight, which declined ­– the fall is at odds with the rise in the official gauge, but suggests downward pressure on industry intensified last month, and there may be more pain to come, Capital Economics said. Tightening monetary policy will also be a theme in the US today with the release of the key ISM manufacturing report (we provide a brief preview below), ahead of Friday’s jobs data; money markets have been pricing in a greater chance of a 75bps FOMC rate hike on September 21st than a smaller 50bps increment, but Fed officials have been reminding us this week that they remain data dependent, and the inflation metrics due September 13th may provide greater steer than the jobs numbers tomorrow; that said, the average hourly earnings figures (and the prices paid components in today’s ISM) should give us a gauge on how inflation dynamics are progressing. Full Day Ahead here.

PREVIEW - US ISM MANUFACTURING PMI (15:00BST/10:00EDT): The consensus expects the ISM manufacturing report to fall in August to 52.0 from 52.8 in July. The Prices Paid component is seen easing to 55.5 from 60.0, while the Manufacturing Employment sub-component is seen slipping further to 49.0 from 49.9. As a point of comparison, regional Fed manufacturing indices have been mixed in the month; but S&P Global’s US manufacturing PMI, which was expected to be little changed, actually fell by almost one point to 51.3 to its lowest in just over two years, and continues to signal subdued operating conditions across the manufacturing sector amid muted demand conditions and production cutbacks. Within the S&P report, the manufacturing output index slipped to a 26-month low at 49.3 (vs 49.5 in July), in contraction for the second straight month. “Ongoing supply chain issues, paired with weak client demand, led to the drop in output,” S&P said, “higher input prices also served to dampen customer demand, as some firms stated that clients were monitoring inventories and essential spending more closely.” The report noted that new export orders fell solidly as inflationary pressures in key export markets weighed on demand, but that said, manufacturers registered the slowest rise in cost burdens since January 2021, and the pace of inflation reportedly softened following lower prices for some key inputs, while goods producers raised their selling prices at the slowest pace for a year-and-a-half in an effort to drive sales. S&P said there were signs of improvements in supply chain disruptions, and delivery times lengthened to the least marked extent since October 2020.









01 Sep 2022 - 09:22- Research Sheet- Source: Newsquawk

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