US DATA: Services PMI Not As Weak As First Feared, But Still Softening
The S&P Global US services PMI saw a solid upward revision to 51.0 in the final February report, although activity still moderated after a solid January and particularly robust readings through May-Dec when it had averaged 54.6. The upcoming ISM services report will be watched to see if there’s a repeat of the job cuts being seen for the first time in three months.
- S&P Global US Services PMI: 51.0 (cons & flash 49.7) in Feb after 52.9 in Jan
- S&P Global US Composite PMI: 51.6 (cons & flash 50.4) in Feb after 52.7 in Jan - whilst better than first thought, it's the lowest since Apr 2024 and points to a sizeable slowdown in real GDP growth.
S&P Global press release highlights (full release here):
- “US service sector activity continued to expand during February, but at a reduced pace as new business growth slowed again.
- Weaker demand growth subsequently weighed on service sector expectations and, amid some worries and uncertainty over federal government policies related to trade and budgets, confidence in the outlook fell in February.
- At the same time, job cuts were recorded for the first time in three months.
- Cost inflation also picked up in February as suppliers raised prices, although competitive pressures meant that service providers increased their own charges only modestly.”
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US DATA: Highest Mfg PMI Output Price Inflation Since March 2024
- The S&P Global US manufacturing PMI was surprisingly revised up to 51.2 in the final January print (prelim 50.1) from 49.4 in December, leaving it at its highest since June.
- “Both output and new orders returned to growth in January, while optimism in the year-ahead outlook for production hit a 34-month high. At least part of the jump in confidence and more buoyant demand picture reflected a sense among firms that business conditions will improve under President Trump.”
- “Meanwhile, input costs continued to increase sharply, leading the pace of output price inflation to accelerate for the third month running to reach the highest since March 2024."
- See the full S&P Global press release here.
BUNDS: /SWAPS: Goldman Do Not Find Bund Short Case Compelling
Goldman Sachs write “the key drivers of Bund cheapening vs swap - in particular the increasing availability of safe assets - are still in place. However, we also find evidence that the Bund cheapening over the last 6 months has moved ahead of the incremental fiscal stimulus likely to be delivered in 2025.”
- They believe that “this leaves the market vulnerable to under-delivery, in our view, especially should the German election fail to free up space to ease fiscal policy.”
- As a result, they suggest “the risk-reward for Bund shorts, either outright or vs swap, is not compelling.”
EQUITY TECHS: E-MINI S&P: (H5) Bearish Threat
- RES 4: 6162.28 High Jan 24 and a key resistance
- RES 3: 6057.75 Low Jan 31 and a gap high on the daily chart
- RES 2: 6021.01 50-day EMA
- RES 1: 5988.75 Intraday high
- PRICE: 5984.50 @ 14:39 GMT Feb 3
- SUP 1: 5935.50 Intraday low
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
The S&P E-Minis contract has started the week on a bearish note. The gap lower today and a breach of support at 5948.00, the Jan 27 low, strengthens a bearish threat and cancels - for now - a recent bullish theme. An extension down would open 5892.37, a Fibonacci retracement point. Initial resistance is at 6057.75, the Jan 31 low and a gap high on the daily chart. Clearance of this level would reinstate a bullish theme.
