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Crude Oil below $40

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The Caixin Flash Manufacturing PMI (Purchase Management Index) in China turned up under the expected value of 48.2, at 47.1, and also under last reading of 47.8. This means that the index has hit a 6-year and a half low. The Chief Economist at Caixin Inside Group, Dr. He Fan, has declared that China’s economy is far from redemption, July’s two year low followed by Augusts’ six year low indicating that there is still room for contraction. Dr. Fan has also stated that although the grim foresight, the systemic risk is still under control, the structure being under continuous improvement.

In Germany, the preliminary PMI in the manufacturing sector spiked to a 16-month high in August, reaching 53.2 and exceeding July’s 51.8. In the service sector the things are the other way around, the index hitting a 3-month low in August, leading to a miss for a 4-month high at 54.00. Markit reports show that, similar to the manufacturing sector, the new orders figure spiked in the private companies’ niche. Data coming from the producers showed a sharp rise in the new exports orders and also a 44-month high new jobs creation rate. Input prices also went up, marking August the 6th consecutive month in the up-trend. Output prices follow, August also having a 3-month high rate of inflation.

In Canada, the release on Friday showed that the CPI (Consumer Price Index) – the governments’ preferred inflation gauge – rose at an yearly 1.3% in July, well above the yearly 1.0% in June. The core-CPI also rose, reaching the expected 2.4% in July from 2.3% in June. The monthly seasonally adjusted CPI rose at a smaller pace in July (0.2%) compared to June (0.4%). Official analysis point that the main factor for these fluctuations is the low price in the energy sector; however their influence is less pronounced in July. Speaking of which, the gasoline index went down with 12.2% on an yearly basis since last July and 14.1% yearly since 2014’s June.

The WTI barrel (considered to be USA’s benchmark) has reached its lowest point since 2009, going under the $40.00 on Friday’s session. The already downward trend has been pushed even farther by the poor results of the Chinese manufacturing PMI. The sentiment is so embedded that the run-down in the dollar has done nothing to the crude’s trend. The supply glut is still a serious threat, EIA (USA’s Energy Information Administration) reporting an unexpected 2.7 million rise in the oil stockpiles.

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