QI TAKEAWAY — Sequentially good fundamental news from the U.S. and China continued to push Fed terminal rate expectations higher at the start of March. Notable second-half optimism was also messaged in the ISM manufacturing report. We suggest taking a broader view of the deflationary inventory cycle when assess
- ISM Mfg New Orders rose 4.5 points MoM in February, the largest jump in 28 months, helping push Fed terminal rate expectations to 5.47% vs. 5.42% on Tuesday’s close; also surprising to the upside was the report’s Pricing Index, printing at 51.3 vs. 46.5 consensus
- February marked the third and fourth straight months of contraction, respectively, for ISM and S&P Global’s Mfg Production indices; driving the weakness is oversupply, with ISM’s Customer Inventories ‘Too High’ stagnant at 18.4, a level consistent with recession
- S&P Global’s Commodity Price & Supply Indicators report showed commodity shortages at their least acute levels in 29 months, verifying a pullback in demand; at the same time, commodity price pressures were flat in February, at some of the lowest levels in 2.5 years