02 Oct A VOLATILE DAY ESPECIALLY IN TREASURIES
Wow! Yesterday was a volatile day. Commenting first upon the sovereign debt market, global sovereign debt markets were roiled by Japan’s announcement that it may stop purchasing its debt because of negative yields and begin purchasing “other debt.”
The selloff was building to “tidal wave proportions.” At one time the US 30-year Treasury was off about 2 points until the release of September’s ISM data. The UST rallied and closed posting nominal gains.
The manufacturing data was considerably lower than expected falling to the lowest level since June 2009. The 47.8 reading was lower than August’s 49.1 post. Any number under 50 suggests a contracting manufacturing sector.
Manufacturing is only 10% of the economy but is a top tier indicator to other parts of the economy. The strong dollar and trade war are the accepted reasons for the decline.
I think it is noteworthy historically an ISM in the “40’s and high 30’s” are typically associated with an economy wide recession.
Equities were the inverse of Treasuries, reversing moderate gains to close about 1.2% lower.
Today is the release of the ADP Private Sector Employment Survey. Last month the Survey indicated considerable strength, strength that was not reflected in the BLS Labor report. Will there be some giveback in September? Analysts are expecting a 140k increase.
More importantly how will the statistics influence outlooks?
Last night the foreign markets were down. London was down 2.04%, Paris down 1.69% and Frankfurt down 1.42%. China was down 0.92%, Japan down 0.49% and Hang Sang down 0.19%.
The Dow should open moderately lower on economic concerns. The 10-year is up 4/32 to yield 1.62%.