US DATA: Highest ISM Services Employment In Three Years
The ISM services index was stronger than expected in Feb at 53.5 as it surprisingly climbed 0.7pts after a -1.2pt drop in Jan. The most notable component was employment, which showed no sign of echoing the service PMI with its first job cuts in three months.
- ISM services: 53.5 (cons 52.5) in February after 52.8 in Jan.
- Employment: 53.9 (cons 51.6, 4 responses) after 52.3 – highest in three years
- Prices paid: 62.6 (cons 60.4, 6 responses vs 58 for the headline index) after 60.4 – highest since Dec and before that Jan 2024.
- The 2.2pt increase follows a volatile period with -4pts in Jan and +5.9pts in Dec. Looking in broader trend terms, it’s above the 58.7 averaged in 2024, 59.3 in 2023 and 57.5 in 2019 but far below the 80-85 readings in 2022.
- The level is similar to the 62.4 seen in Monday's manufacturing prices, although the latter has seen a sharper relative increase recently to its highest since Jun 2022 having increased 12pts since Nov (when Trump won the presidential election).
- New orders: 52.2 (cons 51.5, 4 responses) after 51.3 – the weakest of the main components considering the 0.9pt increase only partly reversed a sharp -3.1pt in Jan.
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EURIBOR OPTIONS: ERU5 Flow Seen
Some ERU5 option flow to note in recent trade:
- ERU5 98.12/98.00/97.75 broken put ladder paper paid 0.5 on 5.5K.
- ERU5 98.125/98.25 call spread vs. 97.875/97.75 put spread paper paid 1 for the call spread on 4K.
EQUITIES: Equities Continue To Trade Heavily
No tangible recovery for e-minis after the cash open, with much of the tariff-inspired overnight weakness consolidated.
- Fresh selling kicks in following the ISM manufacturing survey, given the headline beat and with prices paid back into expansionary territory.
- The 3 major e-mini contracts are 1.4-2.0% lower vs. settlement, with the NASDAQ 100 the weakest and the DJIA the most resilient.
- Technically, a move through session lows in the S&P 500 contract would expose Fibonacci support at the 76.4% retracement of the Aug 5-Dec 6 bull leg (5,892.37).
- The IT, consumer discretionary and industrial sectors lead the move lower, as you would generally expect in a tariff-driven risk-off environment.
- U.S. President Trump’s tariff-centric discussions with the Canadian & Mexican administrations are set to dominate for the remainder of the day.
GILT TECHS: (H5) Trading At Its Recent Highs
- RES 4: 94.50 High Dec 16
- RES 3: 94.00 Round number resistance
- RES 2: 93.64 61.8% retracement of the Dec 3 - Jan 13 bear leg
- RES 1: 93.44 Intraday high
- PRICE: 93.22 @ 03:02 GMT Feb 3
- SUP 1: 91.99/91.52 20-day EMA / Low Jan 24
- SUP 2: 91.10 Low Jan 20
- SUP 3: 89.68/88.96 Low Jan 15 / 13 and the bear trigger
- SUP 4: 88.87 2.764 proj of the Dec 20 -27 - Jan 2 price swing
Recent gains in Gilt futures continue to highlight a corrective phase and signal scope for a continuation higher near-term. Last week’s high print and today’s gains, reinforce current conditions. The contract has traded through 93.09, the Dec 20 high. Sights are on 93.64, a Fibonacci retracement. The bear trigger has been defined at 88.96, the Jan 13 low. Initial firm support is at 91.52, the Jan 24 low. First support lies at 91.99, the 20-day EMA.
