The Week at a Glance: Manufacturing Rebound, Fed Liquidity Signals & Oil’s Fragile Balance
Happy Monday!
Each week, we collect the most important events in the week ahead and provide you with our direction going into them. Enjoy!
Monday – ISM Manufacturing
The ISM Manufacturing data is due this afternoon, with consensus expecting a rebound from last month’s report, forecasting a figure of 47.6. After reviewing our model library, we see substantial risk/reward in betting on an upward surprise in manufacturing data. For instance, our regional PMI model—which uses regional manufacturing prints as inputs—indicates a material increase in the manufacturing PMI today. While not perfect at predicting levels, it excels in forecasting momentum, strengthening our view.
We maintain a bullish stance on Natural Gas over Oil and Copper over Gold heading into the print. The copper-to-gold trade presents a highly favorable risk-reward dynamic, as it tracks closely with ISM manufacturing trends.
Chart 1.a: Manufacturing about to rebound – fuel for copper
Chart 1.b: Copper/Gold is highly responsive to changes in the manufacturing cycle
We’ve started to observe weaknesses in the US economy across our growth models, a major game changer with the ISM report and NFP coming up this week. Could weakness in the US economy prompt the Fed into a 25 bps cut in December? Odds are increasing for such a scenario.
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