August non-manufacturing PMI rose to 56.9 from 56.7 in July, topping expectations
Wall Street stocks fell on Tuesday following the reopening of US markets after Monday’s Labor Day holiday. Investors weighed strong economic data in the context of the Federal Reserve’s aggressive tightening campaign, while rising Treasury yields added to the rout in stocks. On the data front, August non-manufacturing PMI rose to 56.9 from 56.7 in July, topping expectations calling for a decline to 55.1. As such, the report reinforced expectations for aggressive Federal Reserve rate hikes. The Dow Jones Industrial Average fell 0.55%, the S&P 500 slipped 0.41% and the Nasdaq Composite slid 0.74%, notching its seventh session of losses.
Asian equity markets slid on Wednesday as risk aversion persisted across the board. Regional stocks fell to a two-year low, also pressured by disappointing Chinese trade data. Exports rose 7.1% in August from a year earlier, slowing from an 18.0% gain in the previous month, missing expectations for a 12.8% increase. The trade numbers added to concerns for the global economy and outlook. MSCI’s broadest index of Asia-Pacific shares outside Japan gave up 1.5%, to its lowest since mid-2020, while the Nikkei 225 Index shed 0.71%.
In Europe, stocks opened lower as well, with market players continuing to express worries about the impending recession amid the deepening energy crisis in the region. Elevated gas prices pushed the Eurozone inflation to 9.7% in August and with the continued pressure on energy prices it’s expected to reach double-digit levels in the coming months. Now, investors shift focus to the Fed’s Beige Book due later today.
The US dollar extended gains to notch fresh twenty-year highs on Wednesday amid a combination of risk aversion, strong economic data out of the US and rising Treasury yields. The services PMI reinforced the case for rate hikes, with markets now pricing in a nearly 80% chance that the Fed raises rates by 75 basis points later this month. The USD index extended the rally to110.70 before retreating marginally in recent trading. The buck is likely to continue the ascent in the near term despite overbought conditions.