A slowdown in business activity in the world’s major economies is flashing warning signs for the global economy: Most of the world’s biggest economies saw business activity contract in July as spiraling inflation, supply shortages and interest rate hikes weighed on consumers and businesses. Flash PMI data brought to us by S&P Global yesterday pointed to an alarming, downward trend in both the manufacturing and service sectors in the US, eurozone, Japan and UK, forcing us to change our in-house recession-o-meter from ‘it’s a possibility’ to ‘uh-oh.’

Here’s the breakdown:

• Manufacturing and service sector activity in the US fell at its fastest rate since 2020 in August as rising inflation and higher interest rates weighed on demand. “Gathering clouds” were the choice words used by S&P economist Sian Jones to describe the situation. (PMI, pdf)
• Europe is headed for recession: Activity in the eurozone also contracted for the second month running amid rising living costs and supply constraints. “The euro-area composite PMI suggests the economy of the monetary union is sliding toward recession under the weight of soaring energy costs, and the worst still probably lies ahead,” David Powell, senior euro-area economist at Bloomberg said. (PMI, pdf)
• Activity in Japan's service sector also fell into contraction territory, while manufacturing registered the lowest reading since January. (PMI, pdf)
• UK private sector activity grew at its slowest rate in 18 months in August as factories saw the largest fall in production since May 2020. (PMI, pdf)

ALSO WORTH NOTING-

• The EUR is back below parity: The EUR slid to a fresh two-decade low against the USD yesterday, reaching as low as EUR 0.99 amid a growing energy crisis in Europe and a red-hot greenback. (Financial Times)
• The Middle East’s top aluminum producer saw net income more than triple to an all time first-half high. Emirates Global Aluminium netted AED 5.9 bn (USD 1.6 bn) on the back of soaring metal prices. (Statement)

THE CLOSING BELL-

The EGX30 fell 1.1% at yesterday’s close on turnover of EGP 1.72 bn (52.9% above the 90-day average). Local investors were net buyers. The index is down 15.2% YTD.

In the green: Cleopatra Hospital (+3.2%), EFG-Hermes (+0.8%) and Housing & Development Bank (+0.5%).

In the red: TMG Holding (-4.6%), GB Auto (-4.1%) and Fawry (-3.4%).

It’s a downbeat open Asia this morning, with stocks in China, Japan and South Korea in the red. The recent pullback in US and European stocks is unlikely to stop today according to the futures markets, which have shares on Wall Street and across Europe falling at the opening bell.