Global Markets End Rally Following Weak Manufacturing Data & Tumbling Oil Prices

The two-day rally in stocks and bonds that followed Wednesday’s Fed decision flat-lined today after markets were weighed down by uninspiring manufacturing data and falling energy prices.  September’s Purchasing Managers’ Manufacturing Index (PMI) was reported at 51.4, below expectations of 52.0.  The report echoes other weak regional manufacturing figures that have been released so far this month, with this month’s new orders component increasing at the slowest rate of 2016.  Additionally, export orders have reduced to the point where there is an expected contraction, with production numbers hitting quarterly lows.  The European PMI figure similarly missed estimates, coming in at 52.6, the region’s lowest level in nearly two years and European stocks ended the day down about 0.50%.   

Oil prices began the day higher after details surfaced surrounding recent informal meetings held in Vienna between Saudi Arabia and Iran, but have since tumbled following subsequent negative comments made by Saudi officials.  In their meetings, it is said that Saudi Arabia offered to reduce its output of 10.7 million barrels per day (the world’s biggest exporter), if Iran would agree to cap production at 3.6 million barrels per day.  Iran has seen its production increase steadily over the past nine months after sanctions over its nuclear program were lifted in January. The talks between Saudi Arabia and Iran were seen as a positive step towards reducing the supply glut, especially going into the OPEC gathering scheduled to take place next week in Algiers.   Recent reports of Saudi Arabia viewing next week’s OPEC meeting as more of a consultation than an effort to reach a freeze agreement, however, hurt market hopes for a production freeze and prompted a dramatic market selloff.
   
All three major U.S. stock indexes are trading marginally lower for the day, while Treasury yields/swap rates are near even with the 10-year Treasury note sitting at 1.61%.  Brent crude fell 3.5% to roughly $46.00/barrel and WTI crude dropped 3.8% to $44.55/barrel on the day.