US manufacturing sector still looks weak

US manufacturing data remained weak in April, with the ISM manufacturing survey at 47.1, up from 46.3 the previous month and beating projections of 46.8, but still firmly in contractionary territory. Prices paid accelerated once more with the subcomponent at 53.2 in April, up from 49.0 in March, keeping pressure on prices ahead of the FOMC meeting this week. Meanwhile, the S&P Global PMI survey was revised down on the final reading, from 50.4 to 50.2. Still in expansionary territory, but only just. Elsewhere in North America, Canada’s manufacturing PMI survey rose to 51.5 in April, from 50.4 previously.

Janet Yellen cautioned Congress that the US could run out of funds within the month if the debt limit is not raised. On the other hand, JP Morgan’s purchase of First Republic means that the near two months of instability in the US banking sector is at an end, according to JP Morgan CEO Jamie Dimon.  

India’s S&P Global manufacturing PMI rose to 57.2 in April, up from 56.4 the previous month. This marked a four-month high for the index, with new orders rising at the fastest pace since December. The services and composite readings are due for release tomorrow.

Dubai welcomed 4.67mn overnight visitors over the first quarter of 2023, 17% growth on the 3.97mn visitors over the same period in 2022 and closing in on the pre-pandemic level of 4.75mn visitors in Q1 2019. Visitors from the wider GCC and MENA region made up the largest source of visitors at 29%, followed by Western Europe at 22% and South Asia at 16%. Average hotel occupancy in Q1 was 83%, just off the 84% in Q1 2019.

Today’s Economic Data and Events

• 08:30 Australia RBS cash target rate. Forecast: 3.60%
• 13:00 Eurozone CPI estimate, April, % y/y. Forecast: 7.0%
• 18:00 US factory orders, March, % m/m. Forecast: 1.3%

Fixed Income

• US Treasuries moved lower in anticipation of the FOMC this week while the acquisitions of First Republic Bank by JP Morgan helps to alleviate some near-term financial stability fears. Yields on the 2yr UST jumped 13bps to 4.1407% while the 10yr yield added almost 15bps to 3.5681%. Markets are now almost entirely pricing in a 25bps hike from the FOMC which begins its meeting today.
• European bond markets were largely closed owing to public holidays in many markets.

FX

• Currency markets swung toward the dollar at the start of the week, with a sizeable pick-up in USD rates and still tentative risk appetite supporting the dollar. EURUSD dropped by 0.4% to 1.0976 while GBPUSD fell by 0.6% to 1.2496. USDJPY moved higher by 0.9% to 137.50.
• Commodity currencies fared slightly better with USDCAD holding near flat while AUDUSD added 0.2% to 0.6630. NZDUSD fell by 0.2% to 0.6167.

Equities

• Asian equity markets were largely closed on the first day of the month, but Japan’s Nikkei closed up 0.9%, aided by the Yen’s ongoing slide against the USD. European markets were also closed.
• In the US, the S&P 500 closed down just marginally, while the Dow Jones and the NASDAQ both dropped just 0.1%.
• Locally, the DFM ended the day 0.2% lower while the ADX dropped 0.9%. Saudi Arabia’s Tadawul lost 0.2% and the EGX30 closed 2.0% lower.

Commodities

• Oil prices had a choppy day of trading with early losses being reversed later in the trading session, despite no material catalyst to impact prices. Brent futures closed at USD 79.31/b, down 0.3%, while WTI fell by 1.5% to USD 75.66/b. While spot prices have come off following the OPEC+ cut announced at the start of April, time spreads still point to a tight market: 1-2 month spreads in Brent futures are holding close to USD 0.40/b.