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Manufacturing in U.S. Contracts for First Time in Six Months

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US Manufacturing

Manufacturing in the U.S. unexpectedly contracted in August for the first time in six months amid slumping orders and production that raise concern of renewed industrial weakness.

The Institute for Supply Management’s index dropped to 49.4, weaker than the most pessimistic estimate in a Bloomberg survey, from 52.6 in July, figures from the Tempe, Arizona-based group showed Thursday. The decline of 3.2 points was the biggest since January 2014.

Fresh orders to American factories shrank for the first time this year, as production was cut by the most since 2012 and employment fell, the report showed. The figures are surprising considering other data point to an economy that is bouncing back on the heels of still-robust consumer spending and progress in paring inventories.

“It suggests the challenging environment for manufacturers is continuing,” Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “It’s not as if the clouds over the outlook have lifted to give us more clarity on the U.S. and global demand.”

Eleven of 18 industries surveyed by the purchasing managers’ group posted a contraction, including electrical equipment, appliances and components; and apparel, leather and allied products. Among the six that reported growth were industries such as computer and electronic products; food, beverage and tobacco products; and chemicals.

The setback in manufacturing in August probably signals companies remain hesitant to invest in equipment, with corporate leaders awaiting the outcome of the U.S. presidential election and assessing the global economy’s prospects.

An ISM index level below 50 shows contraction. The median forecast in a Bloomberg survey of economists called for a reading of 52, with estimates ranging from 50.7 to 53.4.

Orders Slump

The group’s gauge of orders dropped to 49.1 in August from 56.9 a month earlier, the steepest slide since January 2014. Order backlogs deteriorated for a second month, reaching the weakest level since January and signaling output will continue to languish.

Less demand means producers have little reason to hire. The ISM’s gauge of factory employment fell to a five-month low of 48.3 from July’s 49.4. The measure has shown contraction in all but one month this year.

The purchasing managers’ group’s report also showed measures of inventories at factories and at their customers were each close to 50, indicating stockpiles are about where they should be.

Combined with another month of growth in exports, whose gauge held at 52.5, and imports falling to 47 from 52, the report suggests the weakness in manufacturing may be related more to domestic demand.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Gold Hit 26.8% ROI YTD, the Highest Increase in Value Among Top Assets

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Gold Bars

Gold Delivers 26.8% Return on Investment Year-t-Date

As the world’s earliest form of currency, gold has long been considered a reliable store of value. Unlike banknotes, stock, or other assets, the precious metal managed to preserve the investors’ wealth throughout the years, especially in times of turmoil in the financial markets.

According to data presented by AksjeBloggen, gold hit a 26.8% YTD return on investment, the highest increase in value among top assets.

Gold Return Rate 8.5% Higher than in 2019

Investors tend to focus on gold in times of market volatility, considering it to be a ‘safe haven’ in crises like the coronavirus. In 2019, the value of gold increased by 18.3%, revealed the Blackrock data. The precious metal continued the impressive performance in 2020 with a 26.8% YTD return, 8.5% more than in 2019.

Statistics show that last year, the S&P 500 index increased in value by 31% but was outperformed by Nasdaq, which grew by 35.2%. The MSCI Europe index rose by 26.1% in 2019. China A-shares followed with a 22.3% ROI.

However, the COVID-19 crisis had a massive impact on popular assets, causing a sharp fall in their values during the first half of 2020. The Blackrock data revealed the Nasdaq YTD return hit 23.9%, 11.3% below the 2019 performance. China A stocks reached 10% ROI YTD, much under the 22.3% return in 2019.

Statistics show the S&P 500 index had an 8.4% value increase in the nine months of 2020, almost four times less than in 2019. MSCI Emerging Market Index reached a 4.9% value increase in the same period, compared to 13% in 2019.

The Blackrock data show that crude oil, FTSE 100, and MSCI Europe index witnessed the most significant drop in the nine months of 2020, with their values falling by 34.6%, 22.4%, and 11.5%, respectively.

Global Demand for Investment Gold Surged by 100% YoY

Although many investors value gold as an important portfolio asset, the economic downturn caused by the COVID-19 pandemic led to a surge in global demand for the precious metal.

The World Gold Council data showed the global demand for investment gold increased significantly since the beginning of the year.

In the fourth quarter of 2019, it amounted to 279.2 metric tons. By the end of March, this figure jumped by more than 93% to 539.6 metric tons. The increasing trend continued in the second quarter of the year, with global demand for investment gold hitting 582.9 metric tons, an almost 100% jump year-over-year.

Statistics indicate the global demand for gold for investment purposes hit a record-breaking 1,152 metric tons in the first half of 2020, the highest figure so far.

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Oil Prices News: Oil Gains Following Drops in US Crude Inventories

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Oil Prices Gain Following Drops in US Crude Inventories and OPEC High Compliance Level

Global oil prices extended their 2 percent gains on Thursday after data showed U.S crude oil inventories declined last week.

The price of Brent crude oil, against which Nigerian oil is measured, gained 0.2 percent or 7 cents to $43.39 a barrel as at 12:10 pm Nigerian time. While the U.S. West Texas Intermediate (WTI) crude appreciated by 8 cent or 0.2 percent to $41.12 barrels.

Oil prices extended their three days gain after the American Petroleum Institute said the U.S crude inventories declined by 5.4 million barrels in the week ended October 9.

The report released after the market closed on Wednesday revealed that distillate stockpiles, which include diesel and heating oil, declined by 3.9 million barrels. Those stated drawdowns almost double analysts’ projections for the week.

Much of the fall is due to the effects of Hurricane Delta shuttering U.S. production in the Gulf of Mexico, and as such, will be a transitory effect,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.

“Therefore, I am not getting too excited that a turn of direction is upon markets, although both contracts are approaching important technical resistance regions.”

Also, the report that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, referred to as OPEC+ attained 102 percent compliance level with their oil production cuts agreements bolstered global oil outlook. Suggesting that demands for the commodity are likely not growing and could drag down prices in few weeks, especially when one factor in the reopening of Libya’s Sharara oil field, workers returning to operation in Norway and the Gulf of Mexico.

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Oil Prices Gain on Tuesday Despite Expected Surge in Global Oil Supplies

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Oil

Oil Prices Rise Despite Expected Surge in Global Oil Supplies

Oil prices gained on Tuesday despite Libya opening Sharara oil field for production, labour in Norway reaching an agreement with oil firms to return back to work and oil workers in the U.S returning to the Gulf of Mexico region after the Hurrican Delta.

Brent crude oil, against which Nigerian oil price is measured, gained 1.77 percent to $42.46 per barrel as at 11:15 am Nigerian time on Tuesday.

While the US West Texas Intermediate (WTI) crude oil gained 2 percent to close at $40.22 per barrel.

The improvement in prices was after oil prices plunged as much as 3 percent on Monday following a resolution reached by Libyan rebels and government to commence oil production at the nation’s largest oil field, Sharara Oil Field.

This coupled with labour agreement with oil firms in Norway was expected to boost global oil supplies and eventually weighed on prices and disrupt OPEC+ production cuts strategy.

However, prices surged after Nancy Pelosi said she would commence talks on $1.8 trillion stimulus package following President Trump’s return to the White House after he was rushed to hospital following a positive COVID-19 test.

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