Tuesday's Markets Update (August 1, 2023)

02 Aug 2023 by rate3

On Tuesday, Fitch lowered US rating but leaving markets unperturbed, PMI registered nine consecutive months of decline, job openings are at its lowest in 10 months, Nasdaq dipped a little on traders indecision, BTC continued to stagnate.

Details: The ISM Manufacturing PMI edged higher to 46.4 in July 2023, but below expectations. The ninth straight month of contraction in manufacturing activity (readings below 50) was driven by weak demand, slowing production, and ample supplier capacity. Prices fell at a slower pace, employment fell more, and supplier deliveries increased.

Job openings in the US fell to 9.582 million in June, the lowest since April 2021. Transportation, warehousing, and utilities, state and local government education, and federal government saw declines, while health care and social assistance and state and local government, excluding education, saw increases.

Macroeconomics
USA Rating: Fitch downgraded the US's credit rating from AAA to AA+, citing concerns about the country's fiscal health, citing "the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance" as well as "the repeated debt-limit political standoffs and last-minute resolutions". Fitch expects government debt to rise to 6.3% of GDP in 2023. Agency also mentioned tightening credit conditions, weakening business investment and a slowdown in consumption potentially leading to a mild recession.

However, the downgrade was met with a muted (if any) reaction from the stock market. This is likely because investors have become increasingly skeptical of rating agencies' credibility after 2007 financial debacle. Back then, several rating agencies gave AAA ratings to subprime mortgage securities that later turned out to be worthless.

Thailand: Country's manufacturing PMI fell to 50.7 in July 2023, the softest in 11 months, as output rose the least since June 2022. The trade war between the United States and China is having a negative impact on Thailand's manufacturing sector. Thailand is a major exporter to China, and the trade war has led to lower demand for Thai exports.

Myanmar: Country's manufacturing PMI increased to 51.1 in July 2023, the sixth straight month of expansion, boosted by a continued rise in customer demand and output. Myanmar's manufacturing sector is benefiting from a number of factors, including: strong economic growth, Myanmar's economy is growing at a rapid pace; low labor costs, Myanmar has some of the lowest labor costs in the region; strategic location, Myanmar is located in a strategic location between China and India, and this makes it a good hub for manufacturing exports to both countries.