US manufacturing PMI rises in February

There was a fall in the US S&P Global composite index, which although remaining well above the neutral-50 mark, declined to 51.4 in the February flash estimate, from 52 in January. The fall in the headline figure was driven by the services index, which fell to 51.3 from 52.5 the month prior. The manufacturing index in contrast, rose at its fastest pace since September 2022 on the back of new order strength, rising to 51.5 in February from 50.7.

US initial jobless claims declined in the week ending 17 February, falling to 201K from 213K the week prior. The print was substantially below consensus expectations for a value of 216K. While the four-week moving average was trending downwards, other unofficial data series including google searches for job cuts are trending upwards.

The HCOB Eurozone composite PMI rose to a value of 48.9 in the provisional print for February, from 47.9 in January, to reach an eight-month high. The rise in the headline value was all attributable to an improvement in the services sub-component, which hit the neutral-50 mark, up from 48.4 in January. The manufacturing index, in contrast fell again, dropping to 46.1 in February, from 46.6 the month prior. The weakness in the manufacturing index appears to be driven by Germany, which saw its manufacturing PMI fall to a value of 42.3 in February from 45.5.

The UK S&P Global composite index rose to its highest level since May 2023, increasing to 53.3 in the February flash estimate, up from 52.9 in January. The services PMI remained unchanged at 54.3 on the month, while the manufacturing sub-component saw a marginal gain to 47.1 from 47.0 in January. More encouragingly there was a sharp rise in the future activity index, which rose to 75.2 from 70.6.

The Turkish central bank elected to keep its benchmark one-week repo rate unchanged at 45.0% at its February meeting, the first under the stewardship of new governor Fatih Karahan, appointed earlier this month. The decision was widely anticipated. In its communique, the bank acknowledged the uptick in monthly inflation in January and reiterated that ‘the current level of the policy rate will be maintained until there is a significant and sustained decline in the underlying trend…’

Today’s Economic Data and Events

• 13:00 GE IFO business climate survey, Feb. Forecast: 85.5

Fixed Income

• Shorter-term US bond yields rose on Thursday, as Fed officials cautioned against expectations for early rate cuts. The 2yr yield rose 5bps to 4.7116%, while the 10yr yield was broadly unchanged from the day before at 4.3207%.
• The 10yr bund yield was flat at a value of 2.439%. Yields on the 2yr Gilt fell 2bps to 4.5968% and the 10yr gilt yield remained largely unchanged from the previous day’s close, settling at 4.1052%.

FX

• The dollar spot index was broadly flat on Thursday, falling just 0.05%. EURUSD was fractionally higher, up 0.4% to 1.0823 while GBPUSD rose 0.17% to 1.266. USDJPY gained 0.15% to reach 150.53.
• Commodity currencies were stronger against the dollar on the day. AUDUSD gained 0.1% to settle at 0.6557, NZDUSD added 0.24% to reach 0.6195 and USDCAD fell 0.18% to 1.3482.

Equities

• Global stock markets rallied to all-time highs on Thursday, driven by Nvidia results and optimism about AI. The Dow Jones gained 1.18% and the S&P 500 increased by 2.11%. The NASDAQ gained almost 3%, its biggest jump in more than a year.
• The optimism spread to European equity markets too, with the Eurostoxx 50 index gaining 1.68%, the CAC 40 rising 1.27% and the DAX up 1.47%. Gains on the FTSE 100, in contrast were more muted, up 0.29%.
• Locally, the DFM fell 0.61% while the ADX dropped by 0.82%.

Commodities

• Oil prices continue to be buffeted and buttressed by countervailing forces, with concerns about weak Chinese demand offset against geo-political tension. In Thursday’s trade brent futures gained 0.77% to USD 83.67/b, while WTI rose 0.9% to USD 78.61/b.