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ISM Manufacturing PMI hit 49.7 points in June. Market consensus stood on 53 points after last month’s 52.9 points. This means that the sector fell from growth to contraction, for the first time since July 2009.  The level of 50 separates growth and contraction

EUR-USD traded at 1.26 before the release, after bouncing off the 1.2587 line. Afer an initial hesitation, the pair is now falling towards support. USD/JPY was around 79.75. The pair is now falling to around 79.50.

This is the first hint towards Friday’s Non-Farm Payrolls, with the employment component being the key. The employment component remained at high ground: 56.6 – a very slight drop from 56.9 last month, and well in the growth zone.

A significant drop was seen in new orders: from 60.1 (very strong growth) to 47.8 points, in the contraction zone. Also prices plunged: from 47.5 to 37 points – deep contraction – quite deflationary.

The report stresses that the overall economy is still growing, despite the contraction in the manufacturing sector. As services is a far larger sector than manufacturing, ISM is expected to release a positive number for the services sector.

Another US figure, construction spending, exceeded expectations, rising 0.9% instead of 0.3% anticipated. Also last month’s figure was better than the initial report: +0.6% instead of +0.3%. The US housing sector continues improving, and the bottoming out is clearer with each indicator released.

Earlier, another manufacturing PMI turned lower: Markit’s new PMI figure was revised to the downside: from 52.9 to 52.5 points in June. This is lower than 54 points in May, and still points to growth. ISM is more regarded in the US, and has more market impact. .

In the euro-zone, contraction in the manufacturing sector is with us for already 11 months according to Markit: final manufacturing PMI hit 45.1 points.The HSBC / Markit figure for China showed a eight consecutive month of contraction with 48.2 points. In the UK, manufacturing is also falling for a second consecutive month, scoring 48.6 points.