PMI data spreads unease

US markets have opened marginally in positive territory after coming under pressure throughout the session on Monday.

We're going through a very interesting period in the markets, one in which sentiment seems to change from one day to the next. It could simply be that summer is here, major event risks are becoming fewer and further between and there is an increasing number of uncertainties around the globe that's leaving investors caught in two minds.

The recovery in the second quarter was undoubtedly strong, we've seen the evidence of that for months and we're seeing it still in the earnings reports. If we are seeing peak growth, that's no big deal as long as we continue to see progress and downside risks are kept at bay.

But it's perhaps the emergence of these downside risks that's taking some of the heat out of the markets. While there remains plenty of cause for optimism - and I'm sure that will dominate more in the months ahead - there's seemingly more focus on the delta spread, especially in China, the patches of softness appearing in the data and the risk of the Fed tapering too soon.

The manufacturing PMIs seem to have been the catalyst for the uncertainty this week, with both China and the US producing worse than expected prints. The former is more worrying as the latter is still very strong and coming from a much higher point, but both do feed into the narrative of peak growth and with the China data coming at a time of rising Covid cases, potentially darker days ahead.

I say all of this but I'm sure the proximity to Friday's jobs report, the time of year and the unease around Jackson Hole later this month - and potential taper nod that may come - is probably playing a big role. The global recovery is as uneven as the vaccine rollouts but we can see the light at the end of the tunnel now and ultimately that promise is surely going to be a supporting factor for the markets, regardless of any dips in the interim.

Oil hit by PMIs

It's been a shaky couple of days for oil prices, with the PMIs almost certainly having a large role to play. Slower growth in the world's two largest economies is hardly music to the ears of oil bulls, especially when one is seeing rising cases of delta. WTI fell back below $70 today after peaking around $74 and it continues to look vulnerable in the short-term.

This may be a little bit of an overreaction to the data, with it having come at a time when prices were a little overbought and trading around their summer highs. But with WTI back in the $69-70 region, it will have to arrest the slump soon or risk an early test of the July lows around $65.

Gold steady ahead of jobs data

Gold remains fairly steady, consolidating once more after a surge in activity in the aftermath of the Fed meeting. The price rose back towards $1,833, where it once again ran into resistance, only to give back some of those hard-fought gains. It has since stabilised above $1,800 and the trend remains favourable.

Working in gold's favour is the fact that yields continue to creep lower, aided by that weaker manufacturing PMI which has lent a little support to the dollar. Interestingly though, the employment sub-index could have given an encouraging nod to Friday's jobs report so things may be looking up again soon enough.

Bitcoin to see more profit taking?

We're continuing to see some profit taking in bitcoin, just as it was threatening to break free once more. A break above $41,000 could have been the catalyst for some more extraordinary gains but instead we're seeing it consolidate, registering a fourth consecutive day of small losses and, I'm sure, slowly but surely enticing people back in.

Perhaps we could see it slip a little further, with support actually sitting a little lower around $36,000 which would mark a 50% retracement of the move from the lows to the highs of July.