Equity markets pause as we await fresh US data

• Tentative gains in Europe as German factory orders rise
• All eyes turn to US ADP, claims and ISM data
• Energy slump takes crude to eight-month low

European equities are enjoying a relatively upbeat start to the trading day, with the Ibex leading the likes of the DAX and FTSE 100 higher. Fears of a burgeoning US recession continue to play out in the background as we move throughout the week, with yesterday’s job opening figures providing the latest in a line of data that leads us towards tomorrow’s jobs report. However, for today, European markets have been able to celebrate a rare piece of good news from Germany, with factory orders beating expectations to rise by 2.9% in July. Coming in the wake of the concerning news that Volkswagen may wind up some of their German operations, the strength seen across June (4.6%) and July (2.9%) factory orders help lift the cloud that continues to cast a shadow over the German economy.

Looking ahead, today promises a fresh bout of volatility for global markets, as the release of ADP payrolls, unemployment claims, and the ISM services PMI provide fresh ammunition for traders to utilize. Following the sharp declines seen in the wake of the ISM manufacturing PMI (accounting for only 9% of the US economy), today’s services read-out should be viewed as a more reliable gauge of economic health going forward. After-all, weakness within the manufacturing sector has been a theme of the past two-years. Meanwhile, the ADP payrolls figure is widely expected to stabilize after recent declines took it into a six-month low of 122k. Coming off the back of four consecutive declines in the ADP payrolls figure, the predicted rise to 145k could bring about a relief rally for stocks.

While this week has seen decline across a host of financial assets, the slump in crude oil prices has taken WTI into an eight-month low. In a week that has seen both Chinese and US manufacturing PMI surveys suffer, the demand side of the energy equation has taken centre stage. Nonetheless, yesterday’s sharp decline in US crude inventories and the growing likeliness of OPEC+ pushing back plans to raise production in October have provided some respite for oil prices today. Equity bulls will note that this latest decline in energy prices will help ease concerns around a resurgence in US inflation that comes amid a likely rate cut in the face of above target US CPI and core PCE metrics.