CHINA: Headlines from NPC : Issuance May Point to RRR Cut

The S&P(ESH6) overnight range was 6874.75 - 7017.25, SPX closed +0.54%, Asia is currently trading around 7015. The S&P looked to be potentially in some trouble as it tested its first support but a huge rebound in the US ISM manufacturing PMI saw it do a complete reversal from almost 1.3% down. Stocks continue to confound any who think it might be overdone up here. Even with clear smoke signals coming from the recent back and forth between Nvidia and OpenAI, as well as Oracle looking to raise another $50 to help finance AI projects while its stock and CDS plummet as a result. For the moment it's tough to argue with the price action as dip remains well supported. This morning futures have opened higher again, E-minis(S&P) +0.20%%, NQZ5 +0.40%. On the day, the first support is back toward the 6930-6960 area and then 6820-6870 as the market is again looking to make new highs and looking to potentially regain its upward momentum.

• MNI INTERVIEW: US Manufacturing Rebound Not Yet A Trend - ISM. U.S. manufacturing activity is still on shaky ground despite the first month of expansion in a year and a sharp rebound in new orders that could be temporary, Institute for Supply Management manufacturing chair Susan Spence told MNI.
• Ed Zitron on X: “Oracle needs to raise funding to complete the data centers so that OpenAI can raise funding to pay for the data centers. The annual revenue of AWS is like $110bn and the oAI/Oracle contract is $300bn over five years. How does OpenAI afford this/Oracle pay its debts?”
• Fejau on X: The economy is re-accelerating .” See Fig.1
• Lance Roberts on X: “Bears are all but extinct in the current market. Short interest in both SPY and QQQ are at extremely low levels.”  See Fig.2
• The S&P 500 Index Average True Range(ATR) for the last 10 Trading days:  71 Points

Fig 1: ISM Manufacturing PMI

Source: MNI - Market News/@fejau_inc

Fig 1: Short Interest

Source: MNI - Market News/J.PMorgan/ISABELNET.com

• RES 3: 140.08 - High Jun 13  
• RES 2: 139.05 - High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 131.53 @ 15:55 GMT Feb 02
• SUP 1: 130.94 - 2.0% Lower Bollinger Band
• SUP 2: 130.66 - Low Jan 19
• SUP 3: 130.12 - 1.0% 10-dma envelope  

JGBs came under intense selling pressure last week on the back of weak demand at a 20y JGB auction and increased scrutiny of Japan’s fiscal health. Resultantly, prices traded to new pullback and cycle lows. This affirms the firm downtrend that’s dominated prices since mid-September, and prices will need to challenge resistance before signaling any broader reversal. The break below the Lower Bollinger Band at 130.94 was brief, with 130.12 envelope support below. 

In post-Tokyo trade, JGB futures closed sharply weaker, -28 compared to settlement levels, after a heavy session for US tsys. US tsys finished 4-5bps cheaper across the curve, reversing early Monday gains after a surge in ISM data. 

• The ISM data was far stronger than expected in January as it jumped 4.7pts to 52.6 for its highest since Aug 2022, significantly above even the highest analyst estimate of 51.0. New orders and production both surged to their highest since early 2022 - unlike the final PMI survey released shortly beforehand, it doesn’t look linked to an inventory build.
• For the Jan-Mar quarter, Treasury expects to borrow $574B (prior estimate was $578B; MNI's expectation was $575B) with a financing need of $530B.
• Judging from the BLS's communications yesterday, nonfarm payrolls will be postponed from Friday until an unknown future date (known only once the government is back open).
• Today, the local calendar will see Monetary Base data alongside 10-year supply.