US stocks are declining as investors can’t shake off all the hawkish rhetoric that came from central bankers this week and as the private sector clearly entered a strong downturn. The Fed raised rates by 400 basis point in nine months, a sign that the Fed’s monetary policy is becoming more restrictive. Recession risks will only grow now that Powell has signaled that we should expect ‘ongoing increases’.
After central banks tightened again, global bond yields have risen. This was mostly because they signaled more rate hikes were on the horizon. Although the Eurozone was in contraction territory, the flash PMIs from Europe showed that the readings were better than expected. This could allow the ECB’s rate hike campaign to continue.
Data from the USA
The flash PMIs confirmed Wall Street’s fears that the economy is quickly headed towards a recession. The S&P Global Flash Composite PMI report noted that “US private sector ends year in stronger downturn as demand weakness and price pressures bite.” The services business activity index fell to a four-month low at 44.4.
The headline composite PMI reading dropped to 44.6 in August, which was higher than the expected. Manufacturing activity fell to…