September Eurozone PMI Manufacturing shows a persistent trend of contraction, finalizing at 43.4, a marginal decline from August’s 43.5. This marks a continuous 15-month spell where the headline index has been below the 50.0 threshold, indicating contraction.
Excluding Greece, which barely recorded expansion with Manufacturing PMI of 50.3, every other country monitored in the survey showed downturns. A country-wise breakdown ranks Greece at the top, followed by Ireland (49.6), Spain (47.7), Italy (46.8), France (44.2), Netherlands (43.6), Austria (39.6), and Germany (39.6).
Cyrus de la Rubia, the Chief Economist at Hamburg Commercial Bank, painted a clear picture of the current manufacturing scenario. He stated, “We are feeling pretty certain that the recession in manufacturing continued during this period.” He also added that a significant pickup might only materialize with the advent of the new year. However, he expressed optimism by highlighting the possibility of reaching the lowest point in the current economic cycle.
Drawing parallels with past recessions, de la Rubia remarked, “With the exception of the great recession in 2008/2009, output prices have never decreased at a pace faster than the current three-month average.” He emphasized the rarity of such sharp falls and indicated the likelihood of a rebound.
France and Germany led the downturn, while Spain and Italy showed relative resilience. However, when viewed through the lens of ongoing slowdown duration, Italy emerged as the poorest performer. Its manufacturing sector has been in recession since the latter half of 2022, with Germany joining the downturn in the second quarter of the current year.
“Given our forecast that the global manufacturing sector is bottoming out, these countries may be spared from a downturn lasting longer than two quarters,” de la Rubia added, hinting at a silver lining in the looming clouds of economic contraction.
Full Eurozone PMI Manufacturing release here.
DOW, S&P 500, NASDAQ not out of the woods yet despite relief rally
Major US equity indices followed other global indices and rebounded strongly overnight on easing trade war fear. DOW closed up 428.90 pts or 1.79% at 24408.00. S&P 500 rose 43.71 pts or 1.67% to 2656.87. NASDAQ also gained 143.96 pts or 2.07% to 7094.30.
However, we’d like to note that all three indices are bounded in recent consolidative pattern started last March/early April.
DOW, despite yesterday’s rise, is staying below last week’s high at 24622.26, below 55 day EMA at 24591.41. It’s also limited below near term falling trendline at around 24722.90. This 24600/700 zone is the key resistance zone to overcome for the near term. As long as it holds, current rebound is seen as part of a consolidation pattern from 23344.52. Once this consolidation completes, there will be another decline through 23344.52 to resume the fall from 26616.71. Firm of the 24600/700 zone will delay the immediate bearish case and bring stronger rebound back towards 25800.35 first.