Archived IMT (2009.09.01)

The best manufacturing ISM figure in June 2007 (52.9) and the first figure above 50 since January 2008 could not fail to prevent a deepening sell-off in US and Europe equity indices of about 2%. The ISM was largely driven by the new orders component, and the Cash-for- Clunker program (which is now terminated) had a significant impact in the index. Aside from rumours of a failed US financial institution, disappointing sales figures from Ford (+21% vs exp _39%) and Chrysler (-12%) despite the Cash-for-Clunker helped deepen the selloff. Sterling hit a 7 week low at $1.6140 and still expected to reach $1.6050 as is CADJPY still expected to reach 83.80. Aussie extends selloff after the RBA statement dampened speculation of an Q4 rate hikedespite maintaining that the next move will be up than down. The technical vulnerability of risk appetite (equities, energy and risk currencies) continues to deteriorate to the benefit of the USD and JPY. More losses could be seen on Friday when US unemp rate rebounds to 9.5-9.6% after a typical mid-recession pullback.