Global Manufacturing Slows

The Dow Jones Index started a new trading month on a very bearish note as the Index fell -2.84% for the day, shedding about 469 points over the course of the session. The decline in the index comes amid renewed risk-aversion and dented sentiment as traders were cautious on the back of slower manufacturing growth from China and overall weakness in manufacturing PMIs stretching from the United States to the United Kingdom. The Japanese Yen experienced substantial gains, reflecting the softness in equity prices and growing concerns that a risk-off environment is around the corner. Despite the safe-haven flows, the Swiss Franc was trading relatively flat for the day. The S&P500 gave up -2.85% while the German DAX lost -3.10% for the day as the negativity circled the globe.

Second quarter gross domestic product data from Australia showed lower than expected growth in the economy. Rising a mere 0.20%, second quarter expansion showed a sharp deceleration in economic activity, missing the median forecast expectations of 0.40% and down from the previous quarter's 0.90% rate of growth. The 0.20% GDP growth rate in the second quarter marks the slowest pace of GDP expansion since June 2012. The RBA decided to leave interest rates unchanged at 2.00% at its meeting yesterday while keeping the door open to more accomodative monetary policy down the road depending on further data. The Aussie dollar fell -1.39% yesterday versus the US dollar, falling briefly below the lows at 0.7013. However, following the GDP number, earlier losses were reversed with AUDUSD modestly higher, up by 0.20% in the mid-Asian trading session.