US ISM manufacturing will be in focus – TDS

Analysts at TD Securities (TDS) outlined Monday's key focus areas and also offered a brief preview of the release of the US ISM Manufacturing PMI for January, scheduled during the early North-American session.

Key Quotes:

“The market's focus will remain divided between the ongoing uncertainty regarding the coronavirus and domestic fundamentals. Decent economic data could put upward pressure on rates, but if uncertainty over the virus maintains a risk-off tone, Treasury yields could continue to drift lower. The market has now increased 2020 rate cut pricing to 46bp from 29bp last week — helping to steepen the curve sharply.”

“We expect the manufacturing ISM index to be lifted back toward 50 in January by more positive sentiment following the Phase One trade deal. We expect that lift to offset negative news on Boeing. Even at 50, our forecast is relatively weak in an absolute sense, but it would be up from 47.8 in December (and 47.2 in the original report). Most of the regional manufacturing surveys that have been reported for January have signaled improvement, with the Chicago survey the main exception.”

“Along with the ISM report, construction spending data for Dec will be reported. BEA officials appear to have assumed about a 0.3% m/m rise in construction spending in the advance Q4 GDP report. Lastly, look for the release of the Fed's Senior Loan Officer Opinion Survey (SLOOS) for Q1.”