Morning Update

Retreating UK PMIs, lower than expected US PMIs, Wagner mercenary leader dead, and what's happening today.

UK PMIs Retreat at Fastest Rate Since January 2021

The volatility seen during yesterday’s open continued throughout much of the session following the release of UK and US PMI figures released at 0930 and 1445, respectively. Here, UK PMIs came in considerably softer than expected, with a composite level of 47.9 marking the greatest contraction within the country’s private sector since January 2021. This came as manufacturing PMIs softened to their lowest level in six months, hitting 42.5, while services slumped to 48.7. Along with last month’s print, the weak service figure marked the greatest contraction of the index in over 30 months. Here, S&P’s press release reaffirmed how UK private sector firms had shown a further decline in business activity, which constituted a buck to the trend of expansion seen over the last half-year.

This contraction came as high inventory levels and tighter monetary conditions dampened demand. There is also some indication that improved supply chains have reduced business’ inclination to stockpile. As CIPS’ Chief Economist Dr John Glen, wrote “High interest rates continue to cast a shadow over the UK economy, creating a lull in new orders, stunting output, and ensuring prospects for the private sector remain uncertain”.

US PMIs Come in Softer-than-Expected

Following the trend of softer-than-expected PMI data from across the Atlantic, yesterday’s data release indicated that US Composite PMI data fell to 50.4 against forecasts of 52. Service PMIs fell to 51 from 52.3, on the verge of stagflation, while Manufacturing declined to 47 from last month’s 47 figures. Notable drivers behind the softer-than-expected figure was the Muted demand from key export markets – not least Europe – which fed into the drop in export orders over August. The report also noted that increased cost pressures from energy and labour fed into upward price pressures, raising concerns over the possibility for sticky inflation. That said, as one S&P economist wrote, “one upside is that weak demand is starting to limit pricing power, which should help keep a lid on inflation around the 3% mark.” US firms were recorded as being more optimistic over their economic forecasts for the next 12 months as inflation and interest rates stabilise.

Prigozhin Dead

Yesterday, it was announced that Yevgeny Prigozhin – the leader of the Wagner mercenary group – was killed in a plane crash near the village of Kuzhenkino, north-west of Moscow. The Russian state newswire RIA Novosti reported that all 10 passengers were dead including Prigozhin and his right-hand man, Dmitry Utkin. The Kremlin is yet to confirm these details as speculation continues to mount over the crash and its implications.

Prigozhin’s death comes 18 months after his mercenary group assisted Putin in Russia’s full-scale invasion of Ukraine and just two months after Prigozhin led a mutiny which seized control of two major southern Russian cities. Putin called Prigozhin’s coup as “treasonous” though allowed the Wagner leader to pull back to Belarus following a truce. As Bloomberg writes however, “described as a one-time confidante who was living on borrowed time, Prigozhin openly defied the terms of the truce.” Prigozhin death serves as another reminder of Putin’s contempt for dissenters.

Today in Focus

At 1500 today, all eyes will turn to the much-anticipated Jackson Hole Symposium where markets will be looking to gain further insight into central bankers’ monetary policy, economic conditions, and financial trends. Powell will be speaking tomorrow ahead of Lagarde on Saturday as markets shift their attention to the next round of policy meetings in September. Today will also see the release of US durable goods orders and initial jobless claims, both released at 1330.