Global Recession is on its Way?

What is global recession? Has it already started? If yes – where are we exactly in this global process? Unfortunately, nobody will tell you that because nobody knows how deep the global recession can be. But there are several reasons why we think it could have already started.

Last week PMIs were being published.

In China, Spain, Switzerland, Italy, Germany, the UK Manufacturing PMIs are lower 50. In Australia it’s just above the crucial level. The last PMI in Canada from Ivey was published lower 49 (the previous fact was 60,6).

Traditionally at the beginning of the month the U.S. ISM counted Manufacturing and Nonmanufacturing PMIs. The facts were poor. Non-manufacturing PMI dropped to 52,6 from 55. Manufacturing PMI from ISM was released at 47,8.

Picture 1. ISM Manufacturing/Nonmanufacturing PMIs

Non-Manufacturing						Manufacturing
Index	Series Index Sep	Series Index Aug	Percent Point Change	Direction	Rate of Change	Trend** (Months)	Series Index Sep	Series Index Aug	Percent Point Change
NMI®/ PMI®	52.6	56.4	-3.8	Growing	Slower	116	47.8	49.1	-1.3
Business Activity/ Production	55.2	61.5	-6.3	Growing	Slower	122	47.3	49.5	-2.2
New Orders	53.7	60.3	-6.6	Growing	Slower	122	47.3	47.2	+0.1
Employment	50.4	53.1	-2.7	Growing	Slower	67	46.3	47.4	-1.1
Supplier Deliveries	51.0	50.5	+0.5	Slowing	Faster	4	51.1	51.4	-0.3
Inventories	53.0	55.0	-2.0	Growing	Slower	2	46.9	49.9	-3.0
Prices	60.0	58.2	+1.8	Increasing	Faster	28	49.7	46.0	+3.7
Backlog of Orders	54.0	49.0	+5.0	Growing	From Contracting	1	45.1	46.3	-1.2
New Export Orders	52.0	50.5	+1.5	Growing	Faster	32	41.0	43.3	-2.3
Imports	49.0	50.5	-1.5	Contracting	From Growing	1	48.1	46.0	+2.1
Inventory Sentiment	58.0	56.0	+2.0	Too High	Faster	267	N/A	N/A	N/A
Customers’ Inventories	N/A	N/A	N/A	N/A	N/A	N/A	45.5	44.9	+0.6
Overall Economy				Growing	Slower	122
Non-Manufacturing Sector				Growing	Slower	116

The markets reacted negatively. Dow Jones dropped lower that 26000 but after a while it recovered in attempt to close the gap down. The yield on 10-year United States treasuries fell down to almost 1,5%.

Meanwhile Gold futures returned back above $1500. The market is in contango now – it means that supply is rising and we may expect that price on Gold will increase again.

Last time when we were discussing EUR/USD, we mentioned that EUR may bounce back before rising. That’s what happened at the beginning of October. On 1-st October the pair reversed and started moving up till it reached the resistance on 1,10000. Right now, EUR is testing the resistance and there is a high probability that the main trend will continue.  Linear regression line is heading down.

The resistance line is still on 1,10000; the global target for the price is 1,07700.