Markets start September on the back foot

Markets have limped into September, as equities throughout Asia and Europe drift lower despite all that the month promises to bring. The final week of August helped allay fears of a possible hard landing, with the second quarter GDP upgrade helping to dispel claims that we could be on course for a US recession. With Goldman Sachs upgrading their third quarter GDP estimate to 2.7% over the weekend, it seems that claims of an impending sharp downturn may not be the central expectation within Wall Street. Nonetheless, this week should provide markets with a fresh insight into the direction of travel, with much of the recent pessimism centred around the jobs market. With unemployment on the rise, and huge downward revisions to US payrolls, this week should see a renewed focus on the trajectory of the US economy. As we leave earnings season behind us, traders can take stock and instead turn back to the economic outlook for inspiration. Given the expectation that we will see rate cuts from the likes of the Fed, BoE, ECB, BoC, SNB, and RBNZ, there is a hope that September will bring a less volatile upward trajectory for equity markets.

Today has seen a host of manufacturing data points released across Asia and Europe. However, it was the weekend manufacturing PMI release from China which rang alarm bells, falling to a joint eight-month low of 49.1. Whilst the improved Caixin manufacturing PMI reading of 50.4 highlighted improved fortunes for smaller Chinese firms, the sector clearly remains in a troublesome position as the country attempts to navigate its way out of the recent real estate fuelled slowdown. In Switzerland, a dramatic surge for the manufacturing PMI brought the biggest monthly gain since 2020. Coming in a week that also sees GDP and inflation data out of the region, CHF traders will be expecting fresh volatility as these catalysts help drive sentiment ahead of the expected September rate cut from the SNB.