Today's Update 03-05-2025
Key Points and Metrics
Key Points and Metrics:
US ISM Services PMI:
Actual: 53.5
Forecast: 52.5
Previous: 52.8
Implication: The higher-than-expected ISM Services PMI indicates robust growth in the U.S. services sector. This suggests higher services inflation and stronger employment figures. Following the release, the Dollar, U.S. Treasury yields, and U.S. stocks strengthened.
US ISM Services Employment Index:
Actual: 53.9
Forecast: 51.6
Previous: 52.3
Implication: Employment in the services sector is expanding at a faster pace, signaling a tightening labor market which could lead to increased consumer spending.
US ISM Services Prices Paid Index:
Actual: 62.6
Forecast: 60.4
Previous: 60.4
Implication: Service providers are experiencing higher input costs, indicating upward pressure on inflation.
US ISM Services New Orders Index:
Actual: 52.2
Forecast: 51.5
Previous: 51.3
Implication: New orders in the services sector are growing, pointing to sustained demand in the coming months.
US Factory Orders MoM:
Actual: 1.7%
Forecast: 1.7%
Previous: Revised from -0.9% to -0.6%
Implication: A rebound in factory orders suggests increased manufacturing activity and business investment.
US Core Durable Goods Orders (Revised):
Actual: 0.0%
Forecast: 0.0%
Previous: 0.0%
Implication: Flat growth in core durable goods orders indicates steady demand for long-lasting manufactured goods.
US ADP Employment Change:
Actual: 77K
Forecast: 140K
Previous: Revised from 183K to 186K
Implication: The significant miss in employment change raises concerns about the strength of the labor market. Following the release, the Dollar and S&P 500 weakened.
Market Sentiment Indicators:
Crypto Fear & Greed Index: 20/100 (Extreme Fear)
Fear and Greed Index: 17/100 (Extreme Fear)
Implication: Investors are exhibiting risk-averse behavior, potentially leading to increased market volatility.
Global Trade Developments:
Trade Tensions: U.S. stock futures lost ground due to concerns over trade tariffs imposed by President Trump and disappointing employment data.
Canada and Mexico Announcement: U.S. Commerce Secretary Lutnick indicated an impending announcement regarding Canada and Mexico, which could impact trade relations.
Canada's Stance on Tariffs: Canada will not lift its tariffs unless all U.S. tariffs are removed, highlighting ongoing trade disputes.
European Markets and Economy:
Germany's Investment Plans: Germany's public investment plans are viewed as credit positive by S&P Global, benefiting both the sovereign rating and the broader European economy.
German 10-Year Yield: Increased by 29 basis points, marking the largest one-day jump since 1994. This reflects investor reactions to Germany's fiscal policies.
Bank of England Comments:
Governor Bailey's Remarks:
Emphasized the importance of not abandoning multilateralism amid global trade tensions.
Noted substantial risks to the economy due to tariffs.
BoE's Pill:
Suggested that further progress in disinflation could allow for additional rate cuts this year.
Emphasized the need for vigilance against new shocks that could affect the path back to 2% inflation.
BoE's Greene:
Indicated that tariffs are likely to depress overall growth.
Mentioned that the impact of tariffs on UK inflation is unclear.
Final Thoughts
US ISM Services PMI came in higher than expected, indicating higher services inflation and stronger employment, which strengthened the Dollar, Yields, and US Stocks
US ADP Employment Change was significantly below forecast at 77k (vs 140k expected), weakening the Dollar and S&P 500
US Commerce Secretary Lutnick indicated an upcoming announcement regarding Canada and Mexico, with possible relief considerations from Trump regarding tariffs
German 10-year yield jumped 29bps, the biggest one-day jump since 1994, following Germany's public investment plans
US stock futures lost ground due to concerns over Trump's trade tariffs and poor employment data
European stocks rose while bunds fell in response to Germany's spending plans
Bank of England officials (Bailey, Pill, Greene, and Taylor) discussed monetary policy, with Pill suggesting further rate cuts this year would depend on inflation risks
Both the Fear and Greed Index and Crypto Fear & Greed Index are showing "Extreme Fear" at 17/100 and 20/100 respectively
S&P Global indicated that Germany's public investment plans are a Credit Positive for sovereign rating and positive for Europe
S&P Global also noted that Canada's fiscal space is ample enough to sustain a Triple-A credit rating amid the US tariff crisis
The markets are currently experiencing significant volatility driven by conflicting economic signals. While the stronger-than-expected ISM Services PMI suggests resilience in the services sector with potential inflationary pressures, the disappointing ADP employment data points to a cooling labor market. This mixed economic picture is further complicated by geopolitical tensions around trade tariffs, particularly affecting US-Canada-Mexico relations.
The extreme fear readings in both traditional and crypto markets indicate heightened investor anxiety, suggesting potential buying opportunities for contrarian investors. Meanwhile, Europe is showing signs of fiscal stimulus with Germany's investment plans receiving positive credit ratings assessments, which could provide some stability to European markets despite global trade concerns. Central banks, including the Bank of England, appear cautiously optimistic about inflation trends but remain vigilant about potential shocks that could derail progress toward their targets.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own research and consider your financial situation before making investment decisions.
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Harry