U.S. Manufacturing Beats Expectations, Dow Rebounds to Fresh Highs

Market Overview

U.S. manufacturing data for January surprised to the upside, with both the Manufacturing PMI and the ISM Manufacturing Index expanding beyond market expectations, underscoring the resilience of the U.S. economy and reigniting risk appetite. All three major U.S. equity indices rebounded, with the Dow Jones Industrial Average rising more than 1% to mark its highest level in a week.

On the equity front, Apple led mega-cap gains with a surge of over 4%, while Google reached a record high. SanDisk rallied 15% after reporting a 61% year-over-year jump in revenue. In contrast, Nvidia fell nearly 3% following reports that it had never committed to a $100 billion investment in OpenAI. Disney plunged 7% as forward guidance disappointed investors. After the close, Palantir jumped more than 8% on the back of a 70% surge in earnings, while NXP Semiconductors slid as much as 6% amid weakness in its automotive segment.

On the macro side, stronger manufacturing data pushed U.S. Treasury yields and the U.S. dollar index to one-week highs. The offshore renminbi showed exceptional strength, breaking below 6.94 intraday and approaching a three-year high. Cryptocurrencies experienced a sharp reversal: Bitcoin briefly fell below USD 75,000, triggering approximately USD 2.5 billion in liquidations, before rebounding more than 6% as bargain hunters stepped in.

Commodity markets endured a “blood-red Monday.” Precious and industrial metals collapsed as lingering hawkish sentiment from the Waller nomination, combined with fading safe-haven demand, weighed heavily on prices. Spot gold plunged as much as 10% intraday (around USD 440), marking its lowest level in at least three weeks. Silver also fell more than 10% at one point, while LME tin closed down 10%. Losses narrowed toward the end of the session. Energy markets also sold off sharply: crude oil declined more than 4%, posting its steepest drop in seven months. U.S. natural gas plunged 25% after warmer weather forecasts, fully erasing gains from recent winter storms.

Key Themes Ahead

U.S. Employment May Be Systematically Overestimated

The U.S. January nonfarm payrolls report is due on Friday. Barclays and Citi argue that the core issue is not how many jobs were added in January, but rather how many jobs have been cumulatively overcounted over the past year. Based on the latest QCEW data, Barclays estimates that employment figures have been overstated by an average of 80,000 to 90,000 jobs per month over the past year. Citi adds that clearer signals of labor market deterioration are more likely to emerge during the spring and summer.

January ISM Manufacturing PMI Far Exceeds Expectations

The U.S. January ISM Manufacturing PMI jumped sharply from 47.9 in the prior month to 52.6, well above the consensus forecast of 48.5. The upside surprise was driven primarily by solid growth in new orders and output. The employment index climbed to a one-year high but remained in contraction territory. Meanwhile, the prices paid index rose to its highest level in four months.

Key Event to Watch (GMT+8)

23:00 (US)

December JOLTS Job Openings Report (Rescheduled)