Daily Market Commentary 4th August 2022

US equity markets bounced back overnight, wiping out the previous session losses. Markets have been very nervous, following the US House Speaker Pelosi’s visit to Taiwan, fearing a military response from China. China has rattled the sabre, but so far no more than that, allowing a relief rally to calm markets and the recent rebound to continue. Some market analyst’s pointed to a better than expected ISM Non-Manufacturing PMI number, but this was around recent lows and ignored the S&P Services/Composite PMI. These numbers fell sharply into negative territory, revealing a sharp contraction. Therefore the rally can probably be chalked up to a relief rally, following Geo-Political events surrounding Taiwan.

European PMI also fell sharply, with German Services and Composite data, falling into negative territory, confirming a contraction. EU PMI data was also in contraction mode, while Retail Sales contracted 3.7%. The energy crises continues to seriously damage Europe and more particularly Germany, which is being played out in the data. The EUR drifted to 1.0150, while the Yen crashed back to 134.50.

Australian PMI data was weaker, along with trading partner Japan, confirming economic slow-downs, although Chinese PMI did show a slight improvement. The AUD bounced back from 0.6900, while the NZD pushed back from 0.6220, following weaker than expected employment numbers.

Attention will now turn to US employment data and the Bank of England rate decision. A keen eye will also be kept on Geo-Political developments in the South China Sea, but China is playing the ‘long game’.