Global Manufacturing Slowing Down; US PMI (ISM) is next

GBP continues to be punished for disappointing fundamentals. Data points to global slowing of manufacturing activity. Corn futures plunge. Market turns to US Manufacturing PMI (ISM).

USD is little changed since London session opened. Most currency pairs have been trading within a narrow range with the exception of GBPUSD that dropped almost 100 points after disappointing PMI data and reached the important level 1.60 yet again.

Manufacturing activity seems to be dropping globally and in many cases prints are dangerously close to or even bellow the 50 level that indicates a contraction. Latest round of disappointments came from Spain (PMI at 47.3, lowest since 1/2010), Italy (PMI at 49.9, lowest since 10/2009), Switzerland (SVME PMI for June dropped to 53.4 from previous 59.2) and the UK (PMI in June printed 51.3 from previous 52). Even revisions of previously released data often show downward trend German PMI for June was revised to 54.6 from first estimate of 54.9. Euro zone final PMI for June stayed at 52, same as initial estimate.

Politicians mostly count on growth to repay debt incurred by governmental stimulus during recessions. It will be interesting to see social and political ramifications should the economy slip into another recession. Even the slightest change in GDP growth or the unemployment rate often causes massive disruptions in tax revenues or expenditures over a longer period of time.

Equities continue their ascend but some commodities trade heavy. Corn futures collapsed from around 650 to 580 as US farmers sharply increase acreage of planted corn. Gold trades at session lows after falling from 1514 to 1487 USD/oz over the past few sessions. Silver trades with similar price action around 33.87 USD/oz.

Due at 9:55 am ET, US final Univ of Michigan Consumer Sentiment index is expected at 72.1 but impact is likely to be limited as June ISM Manufacturing PMI is due only five minutes later at 10:00 am ET. Manufacturing is expected to drop from 53.5 to 51.9 which would be the weakest reading since September 2009 and not far from the critical 50 level that indicates contraction of the manufacturing sector. Peak manufacturing was recorded back in February when reading reached 61.4. Also worth looking at US May construction (seconds before ISM), expected to be flat.