US ISM survey surprises to upside

The US ISM manufacturing survey for December surprised the upside at 49.3, beating the predicted 48.2 and up from 48.4 the previous month. The reading was the strongest since March, albeit still in contractionary sub-50.0 territory for the ninth month running. The upside surprise was driven by an improvement in new orders at 52.5, up from 50.4 previously and the highest reading since January. Prices paid accelerated to 52.5, up from 50.3 in November and higher than the predicted 51.8, but Employment fell at a faster pace compared to November, dropping to 45.3. This potentially complicates the path forward for the Fed and the NFP report due Friday, with a predicted net gain of 160,000, will be watched closely.

Saudi Arabia’s December PMI survey fell modestly to 58.5 in December, down from 59.0 in November. The index continues to indicate robust growth in the private non-oil sector, however, remaining well above the neutral 50.0 line and averaging 56.5 over 2024.

Headline CPI inflation in Turkey slowed to 44.4% y/y in December, down from 47.1% the previous month. This marked the slowest pace of price growth since June 2023. On the monthly measure, prices were up 1.0%, a slowdown from 2.2% m/m in November. Core inflation also slowed, to 45.3% in December from 47.1% the previous month. The slowdown in December’s inflation data was sharper than expected and is supportive of further easing by the central bank over its upcoming meetings.

Today’s Economic Data and Events

17:00 Germany CPI inflation, % y/y, December. Forecast: 2.4%

19:00 US factory orders, % m/m, November. Forecast: -0.3%

Fixed Income

• There was little movement in USTs over the middle of last week following the rally seen on Monday, but the upside surprise on the ISM manufacturing survey released Friday, which showed inflation accelerating, led to a sell-off over the course of the session.
• The 2yr yield climbed 4bps on Friday to end the week at 4.2787%, still down 5bps over the week however after Monday’s rally. The 10yr yield also climbed 4bps Friday to end the week at 4.5975%, down 3bps over the week.
• The minutes from the US Fed’s FOMC meeting in December are set for release on Wednesday.

FX

• The dollar index closed up 0.9% w/w against its basket of peers on Friday, the fifth straight week of gains even as it sold off modestly on the last day of the week.
• GBP fell 1.2% over the week to end Friday at 1.2423, while EUR ended 1.1% lower at 1.0308. The dollar added 0.4% w/w against JPY which fell to 157.26.

Equities

• Global equity markets were somewhat mixed last week. US indices ended the week lower despite a rally on Friday as the Dow Jones, the S&P 500, and the NASDAQ ending down 1.4% w/w, 1.6% and 2.0% respectively.
• European markets were more positive, with the FTSE 100 adding 1.1% as the pound sold off, while the DAX added 0.1% and the CAC closed flat.
• Asian markets that were open were also down, with the Hang Seng dropping 1.7% w/w and the Shanghai Composite 5.5%.

Commodities

• Oil prices have started the week with a rally that has pushed them to a two-month high in the first week of 2025, with gains over the past five straight sessions. Brent futures ended Friday at USD 76.5/b, up 4.4% w/w, while WTI closed up 6.2% w/w at USD 74.0/b.