US manufacturing activity slows

The US ISM manufacturing PMI fell to a 3-month low in May, declining to a value of 48.7 from 49.2 in April. Consensus expectations had been for the May outturn to rise to 49.5. The deterioration in the headline measure was largely driven by a sharp fall in the new orders sub-index, which fell to a value of 45.4 from 49.1 in April. There was also a significant drop in the price paid sub-index, from 60.9 in April to 57.0. In contrast the employment sub-index rose above the neutral-50 mark, indicating the first expansion in the sector’s workforce since September.

Turkish CPI inflation accelerated to 75.5% y/y in May, up from 69.8% in April. The print was higher than the predicted 74.8% and marked the fastest pace of annual price growth since November 2022. On a monthly basis, prices were 3.4% higher, faster than the predicted 3.0% and up from 3.2% in April. Core inflation was 75% y/y. The May print is expected to be the peak for Turkish inflation, with the TCMB predicting that it will have slowed to 38% y/y by the end of the year on the back of favourable base effects. The Turkish central bank kept its benchmark one-week repo rate on hold at 50.0% at its May meeting, noting that indicators pointed to a slowdown in demand and that the lagged effects of previous tightening were still to feed through. With inflation now set to slow, the expectation is that the next move from the TCMB will be to cut, though for the time being real rates are still sharply negative.

Today’s Economic Data and Events

18:00 US JOLTS job openings (April), Forecast: 8360K

18:00 US factory orders (April), Forecast: 0.6% m/m

Fixed Income

US treasury yields declined on Friday, following the weaker than expected ISM manufacturing print. The 2yr yield fell by 6bps to 4.808%, while the 10yr yield declined by 11bps to reach 4.3884%. Moves in major European bond yields were also generally lower on the day. The 10yr UK Gilt yield fell 9bps to 4.2201%

A Bloomberg report suggest that Saudi Arabia’s PIF has mandated several banks to arrange a series of investor calls, related to the issuance of dual-tranche 5yr and 15yr GBP-denominated bonds.

FX

The USD spot index fell again on Monday, on the back on weaker US manufacturing data, declining 0.51%. Both EURUSD and GBPUSD gained 0.5%, leaving them at 1.0904 and 1.2808, respectively.

Commodity currencies were also stronger against the dollar, with AUDUSD gaining 0.54% to 0.6689, and NZDUSD rising 0.8% to 0.6193.

Equities

US equity markets rallied for a second consecutive day, driven by technology stocks. The S&P 500 rose 0.11% and the NASDAQ gained 0.56%. A technical error on the New York stock exchange caused trading to be halted several times.

Major European equity indices gained on Monday. The CAC 40 rose 0.06%, the EuroStoxx 50 gained 0.4% and the DAX jumped 0.6%. The FTSE 100 fell 0.15%.

Locally, the DFM gained 0.38% and the ADX rose 0.64%.

Commodities

Oil futures declined sharply on Monday, with markers appearing to react to combination of the potential unwinding of voluntary production cuts from October onwards, and a weaker than expected ISM manufacturing print. Brent declined by almost 4% to USD 78.36/b, while WTI fell 3.6% to USD 74.22/b. Both benchmarks have declined further in early morning trade.