The latest PMI reading out of China is equally grim as it hit a 9 month low (47.8 vs 49.3 in July) and indicates an increasing rate of contraction. All of the reading’s sub-indices point to increasing contraction, showing that all facets of the economy are slowing. New export orders were particularly bad, coming in at 44.7, the lowest since March 2009 and the post-Lehman trade collapse in trade. This data is in-line with export data from Japan yesterday, which also showed a rapid decline.
Yesterday the release of FOMC meeting minutes said the Fed believed new stimulus would be needed fairly soon unless growth picks up substantially. This caused gold to break through its 200-day moving average and close at the highs of the day and the EUR/USD to continue its recent march higher. However, this morning in CNBC St. Louis Fed president Jim Bullard said that the minutes are “a bit stale.” Since the Fed’s last meeting economic data has actually been better than expected, meaning the Fed will likely think twice before implementing new easing when it meets next.