US focus turns to ISM manufacturing for September

Market movers today

• In the US focus turns to ISM manufacturing for September. It has surprised clearly to the upside in the past months but we think it is time for some moderation. It has shown frequent overshooting in the past year, both to the up- and downside compared to Markit PMI and is currently running higher. Although activity is strong in the US, it is not as strong as indicated by ISM.

• ADP employment in the US will also catch some attention as input for the expectations about Friday’s payroll number. Consensus looks for 200k. We see some upside risk to this.

• This morning the final manufacturing PMIs out of the euro area are due for release, providing details for the rest of the euro area outside Germany and France.

• The UK publishes the first release of PMI manufacturing for September. It has shown a clear decline in the past months and given the decline in Germany we expect some downside here as well. Consensus is for a small rise from 52.5 to 52.7.

• In Scandinavia Sweden and Norway will release September manufacturing PMIs.

Selected market news

In Hong Kong the size of the demonstrations is expected to increase, as it is China’s National Day today and the start of a two-day public holiday in Hong Kong, see BBC news. In addition, the deadline for the demonstrators’ demand for the resignation of Hong Kong’s Chief Executive CY Leung expires today. With many people in Hong Kong not back to work until Monday, the Hong Kong administration will probably try to ride it out and the longevity of the demonstrations will really be tested on Monday.

In China the official manufacturing PMI was unchanged at 51.1 in September and hence a notch better than expected, see China: NBS manufacturing PMI unchanged inSeptember, 1 October. The final estimate for the HSBC manufacturing PMI in September was also unchanged at 50.1 compared to August. Overall the manufacturing PMIs suggest that the slowdown in China is less severe than indicated by the weak hard data for August. China started its week-long Golden Week public holiday today.

In Japan the Tankan business survey was a mixed bag. On a positive note, current conditions for large manufacturers were better than expected and large manufacturers plan to increase their capital expenditures by 8.6% in the current fiscal year, suggesting they have not lost confidence in the economy. However, business sentiment for the nonmanufacturing industry was markedly weaker than expected. Hence, it appears the consumption tax hike in April is hurting, while manufacturers benefit from a weak yen. Overall Tankan still suggests a weak recovery in Japan

In the FX market the rouble is under considerable pressure on speculation about possible capital controls to stem the capital outflow from Russia, see Financial Times.