A Volatile Kick-Off to the Seasonally Weak September: Sep. 2, 2025

Markets are kicking off September on the wrong foot as a mix of developments stateside and overseas weighs on animal spirits. Unfavorable seasonals and sluggish US economic data combined with heavy levels of corporate financing appetites are keeping would-be purchasers of equities and fixed-income at bay and a miss on ISM-manufacturing and a contraction in real estate capital expenditures, both released 30 minutes after the bell, failed to inspire dip-buying. Meanwhile, stronger-than-expected inflation in Europe alongside renewed worries about unsustainable government finances across the continent are lifting price pressure expectations and term premiums, resulting in climbing global interest rates. Geopolitics are additionally contributing to investor pessimism with Moscow and Beijing securing a gas pipeline deal that is strengthening prospects of long-term collaboration at a time when New Delhi is looking to get closer to its Far East neighbors against the backdrop of weakening relations with Washington. Stocks are getting sold throughout the major sectors and benchmarks as well as Treasuries, with the yield curve ascending in bear-steepening fashion led by the lengthier tenors and motivated by news at home and abroad. Natural gas and lumber are facing declines as well. Conversely, insurance bets are catching bids as volatility protection instruments are being scooped up while the safe-haven gold metal reaches a fresh record for the first time since April. The dollar is also advancing on heavier borrowing costs as silver, crude oil and copper commodities post gains while traders scoop up bitcoins and forecast contracts tied to crypto as well as this week’s Jobs Friday numbers.

ISM and S&P Provide Different Views on US Manufacturing

This morning’s Manufacturing Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) signaled the sixth consecutive month of the sector’s contraction in August while S&P Global’s indicator pointed to a meaningful expansion. ISM’s headline score of 48.7 arrived beneath the weakening-strengthening-threshold of 50, the median estimate of 49 and S&P’s 53. It was a shallower rate of decline than July’s 48, however. Encouragingly, new domestic orders recovered into growth territory, coming in at 51.4, and prices rose at a slower pace than the previous month but remained elevated at 64.7. Conversely, production, employment, backlogs and export demand were very weak. The discrepancy across the competing PMI reports, with the newer S&P gauge being released prior to the old-standing print, is likely to draw increased scrutiny in the near future in similar fashion as payroll differences between ADP and the BLS, which has been a hot topic. ADP’s jobs figures are also published before the BLS statistics, which have been relied on for decades, like ISM.

Real Estate Sector Continues to Languish

The real estate sector remains in dire straits with construction spending posting its tenth monthly contraction in the past 11 months with the only increase all year being a modest 0.1% month over month (m/m) gain in April. July capital expenditures dropped 0.1%, in-line with projections and better than June’s -0.4%. The commercial and new multifamily segments weighed the most on the report, dropping 0.8% and 0.4% m/m. But fresh single-family home projects posted a 0.1% advance, lifting the overall residential category to a marginal 0.1% gain. There were some bright spots in the print, however, with the conservation/development, water supply, lodging and healthcare components seeing activity rise 1.8%, 1.1%, 0.9% and 0.5% m/m.

Need Sweet-Spot Data for a Bullish September

Today’s market sluggishness occurs as we have a busy stateside calendar in the coming days with the main event being Jobs Friday. However, we’re in a weak seasonal period and bulls likely need the figures to the be in the sweet-spot approving rate cuts by the Fed while signaling a continuation in the economic expansion. Statistics that are fire hot or ice cold are poised to disappoint stock market investors that are looking for an incrementally accommodative central bank alongside an ongoing growth cycle. A room-temperature combination is perfect for higher share prices as it underpins equity valuations, contains borrowing costs and paves the way for corporate earnings advancement. But numbers that keep the Fed on hold, or even worse, dial up slowdown worries, are probably going to sustain the selling pressure of the past few days.

International Roundup

Annual Pace of Inflation Climbs Marginally in Europe

Euro area prices increased 0.2% m/m and 2.1% year over year last month, according to a preliminary release of the Harmonised Indices of Consumer Prices (HICP). The headline y/y number is up marginally from 2.0% in July. The food, alcohol & tobacco category and the services component led the y/y price gains, climbing 3.2% and 3.1% compared to 3.3% and 3.2% in July. Increases for non-energy goods matched July’s 0.8% increase while energy sank 1.9% after a 2.4% drop in July. When excluding energy and food, the HICP climbed an estimated 0.3% m/m and 2.3% y/y, compared to a 0.1% m/m drop and the annual gain of 2.4% in July.

And Unemployment Falls

The euro area’s unemployment rate fell from 6.3% in June to 6.2% in July, according to Eurostat. The metric also improved relative to July of last year when the rate was 6.4%. By headcount, the number of idle individuals dropped by 170,000.

Singapore Manufacturing Strengthened Last Month

Manufacturing in Singapore strengthened marginally last month with the sectors’ Purchasing Managers’ Index moving from 49.9 to 50, which is the contraction/expansion threshold, according to the Singapore Institute of Purchasing and Materials Management (SIPMM). Perhaps more significantly, the PMI for the electrics industry, which represents approximately a third of the country’s manufacturing, climbed from 50.2 in July to 50.4 last month. Electronics companies experienced acceleration in new orders, exports, factory output, supplier deliveries and input purchases.

Tourists Help Boost Hong Kong Retailing

Retail sales in Hong Kong climbed 1.8% y/y in July after posting 0.7% and 2/4% gains in June and May, according to the Hong Kong Census and Statistics Department. Year to date relative to the same period of 2024 painted a different picture, however, with retail sales down 2.6%. July results were boosted by tourism climbing 12% y/y with 4.39 million visitors following 3.48 million visitors from other countries in June. The value of transactions for sales of the jewelry, watches, clocks and valuable gifts group jumped 9.4% y/y after a 6.9% rise in the preceding month. Clothing, footwear, and related items increased 0.1% after sinking 4.6% in June.

Monthly Inflation Turns Negative in South Korea

South Korea’s CPI descended 0.1% m/m in August, falling considerably below the economist consensus estimate for the metric to remain unchanged from July’s 0.2% gain. Relative to August of 2024, the gauge was up 1.7%, moderating considerably from 2.1% in July and much cooler than the 2% economist estimate.