POWER: French Afternoon Renewable Forecast

• The ISM manufacturing index was weaker than expected at 48.7 in May (cons 49.6, prior 49.2).
• The drop in the headline index follows a weak set of regional Fed surveys this month, including last week’s MNI Chicago PMI release.
• The ISM Manufacturing prices paid component fell 3.9 points to 57.0, below consensus forecasts of 59.5 though still indicative of solid price pressures versus earlier in the year (May's prices paid were 4.1 points above the January level). The release notes that “Commodity prices continue to increase, especially fuel, natural gas, aluminum and plastics. Steel is showing signs of weakness”.
• Meanwhile, the employment component printed in expansionary territory for the first time since September 2023 at 51.1. For the purposes of this Friday's nonfarm payrolls release, the uptick could spur some upside reconsiderations for existing forecasts., especially after the S&P manufacturing PMI also signalled stronger employment dynamics.
• New orders fell 3.7 points to 45.4 (vs 49.1 prior), helping the new orders minus inventories metric fall to -2.5 (vs 0.9 prior).

Brent slips below $80 for the first time since February, with next support at the 61.8% retracement of the Dec 13-Apr 12 bull cycle ($79.87) breached in quick order. $79.00 then gives way.

• We then get a relief rally for oil as the USD softens in the wake of a disappointing U.S. ISM data, with Brent briefly regaining $79.50.
• Prevailing technical conditions in Brent turn more bearish on the move, with moving average studies already deepening that theme.
• There is now some distance until next support, which comes in at the Feb 5 low.
• A reminder that many had already deemed the outcome of the weekend’s OPEC+ meeting outcome to be bearish and that was before the technical break was factored in.