Signe Roed-Frederiksen
Danske Bank A/S
- The US manufacturing ISM for October declined to 50.1 from 50.2 (consensus expectations 50.0, Danske Bank 49.6) and the details of the survey was better than the headline.
- New orders increased to 52.9 from 50.1 which is the best level since July this year. Customer inventories, which is our preferred inventory measure in the survey, declined to 51.0 from 54.5 and the order-inventory differential took a rebound from the dip last month but remains depressed. The inventory index also showed a decline to 46.5 from 48.5 and overall suggest that the inventory correction evident in the Q3 GDP report continued into Q4 for the manufacturing sector.
- New export orders increased to 47.5 from 46.5 suggesting some stabilisation in global demand. The employment index softened to 47.6 from 50.5 and we have pencilled in a 11,000 drop in manufacturing employment for Friday’s non-farm payrolls report but stick to our estimate of 170,000 in overall job growth. The import index showed a major dive to 47.0 from 50.5 – the weakest level since June 2009. This stand in contrast to other data suggesting that domestic demand remains solid and it might be related to the drop in inventory accumulation.
- Our short term ISM model and the ‘new orders – customer inventories’ differential both suggest an ISM around the 50 level in the coming month, but we are likely past the bottom. A turn in the global manufacturing cycle in the coming months will bolster the Fed’s outlook for US growth above trend next year and we continue to believe that the first rate hike will come in January.
ISM chart book
New orders reboundOrder-inventory differential is looking better
Imports index weakest since 2009
Employment index declined further
ISM and manufacturing production
Our model suggest the ISM is bottoming
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.