US Open: US PMI and ISM stronger than expected, USD appreciates 📌

• Wall Street is set to opens lower
• Manufacturing PMIs from EU still indicate contractation
• Tesla drops initally 4.0% after publishing lower than expected preliminary data for Q3

Today, Wall Street is poised to open lower once again, as futures indices have erased gains from earlier in the day. Both the US500 and US100 are once again approaching a critical support level near the recent local low. US 10-year bond yields are surging by over 1.5%, and the dollar is appreciating, establishing itself as one of the strongest currencies among developed economies. It's evident that risk assets are not favored today, as investors are shifting towards lower-risk and higher-liquidity positions.

PMI publications 

Today, investors are served with final PMI data worldwide and ISM from the US. So far, PMI from Europe came mostly better than expected but released data still indicates a contraction phase of major economies. Summary of PMI manufacturing from Europe for September: 

• Spain: 47.7 vs 46.5 expected (46.5 previously)
• Italy: 46.8 vs 45.8 expected (45.4 previously)
• France: 44.2 vs 43.6 in first release (46.0 previously)
• Germany: 39.6 vs 39.8 in first release (39.1 previously)
• Euro area: 43.4 vs 43.4 in first release (43.5 previously)

Most of those were revisions to flash readings and therefore no major market reaction was expected. Indeed, that was the case with EUR and European indices barely reacting to the data.

PMI from the US

• Manufacturing PMI Final Actual 49.8 (Forecast 48.9, Previous 48.9)

Output improved in September, reversing some losses from August due to increased employment and better supply availability. Production growth pace is still subdued due to a decrease in new orders, especially from weaker export markets. Optimism about the future as signs point to potential improvements by year-end. Manufacturers are more hopeful about future output than they have been in nearly one and a half years. However, the inflation outlook is concerning, with producers' costs increasing at their fastest pace in five months. This surge in costs, influenced by rising oil prices, is leading to higher prices for customers, potentially intensifying inflation pressures.

ISM from the US

• ISM Manufacturing PMI Actual 49 (Forecast 47.9, Previous 47.6)
• ISM Mfg. Prices Paid Actual 43.8 (Forecast 49, Previous 48.4)
• ISM Mfg. Employment Index Actual 51.2 (Forecast -, Previous 48.5)
• ISM Mfg. New Orders Index Actual 49.2 (Forecast -, Previous 46.8)

Economic activity in the U.S. manufacturing sector saw contraction for the 11th consecutive month in September, despite some recovery signs. The Manufacturing PMI was recorded at 49 in September marking its best performance since November 2022. While several indexes like New Orders and Production showed slight increases, the Prices Index decreased by 4.6% points to 43.8, indicating a trend towards price reductions. However, rising energy costs in recent months could impact future material prices. The report highlights that while demand remains soft, production improved, and suppliers retained capacity. 

It's interesting to note the discrepancy between ISM prices and PMI prices, which indicate opposite directions. The coming months will reveal whether the heightened inflationary pressure will persist. For now, this only underscores how rapidly the current environment can change based on the sector and field.

Selected top news:

• Goldman warned that rising rates are beginning to impact US corporate profits.
• Kevin McCarthy is still under pressure. Joe Biden urged him to follow up on funding for Ukraine after the bill approved by Congress omitted money for Kyiv. And Matt Gaetz said he plans to file a motion to oust the House speaker, triggered by the lack of spending cuts GOP hardliners wanted in the government funding bill.
• Bill Ackman is interested in pursuing a deal with Elon Musk's X through a new investment vehicle, Pershing Square's SPARC, which received regulatory approval to target a company before raising funds and taking it public.

US technical outlook

US500 is currently trading at 4320 points, reflecting a 0.20% decline today, following four days of a bearish trend. Despite an attempt to rebound from the 4300 level, the selling pressure persists, preventing a sustained recovery. The index is currently poised to retest the critical 4300 support zone, which has played a significant role in recent price action and will be closely watched as traders gauge whether it holds or gives way to further downside pressure.

Company News:

Tesla (TSLA.US) dropped as much as 4.0% after the company reported third-quarter deliveries that fell short of the average analyst expectations. The company delivered a total of 435,059 vehicles for the quarter, below the consensus estimate of 456,722.

• Model S/X deliveries at 15,985 (compared to an estimated 17,722) 
• Model 3/Y deliveries at 419,074 (missing the estimated 439,362). 

Tesla also produced 430,488 vehicles during the quarter, below the estimated 461,992, 

• Model S/X production at 13,688 (compared to an estimated 18,492)
• Model 3/Y production at 416,800 (falling short of the estimated 454,060). 

Tesla attributed the decline to planned factory upgrades, stating that their 2023 volume target of around 1.8 million vehicles remains unchanged.

Source: xStation 5