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The strongest ISM-manufacturing figure in 41 months is bolstering confidence in the health of the domestic economy, which lifted stocks, rates and the greenback. The gains occur as the US Dollar is extending its rally from a four-year low on Thursday following the nomination of Kevin Warsh to Federal Reserve chair, and the currency’s persistent appreciation continues to weigh heavily on precious metals, sinking silver and gold by 21% and 41% relative to their all-time highs reached before the weekend. The resurgence of the “Buy America” trade, however, has equities rising and starting February in bullish stride, subsequent to three consecutive days of losses for the S&P 500 to end January. A sharp decline in energy prices also boosted sentiment, as President Trump stated that he is in discussions with Tehran, causing investors to perceive that tensions between the two nations are simmering. Wall Street is on offense today as a result, with 9 out of 11 sectors advancing, hedging demand weakening, crypto recovering and forecast contracts catching bids too. The yield curve is ascending in bear flattening fashion, with the shorter, monetary policy sensitive tenors climbing faster than duration, as hot data strengthens the argument that the central bank may already be near r squared and that the two reductions priced in for 2026 could very well be it for this cutting cycle irrespective of what the White House wants.
Manufacturing Surges to Start the Year
Manufacturing expanded at its strongest rate in almost four years as factory production accelerated fiercely in January to fill heavy amounts of customer orders and growing backlogs. The Institute for Supply Management’s Purchasing Managers’ Index (PMI) jumped to 52.6, the highest level since the summer of 2022, flying past the median estimate of 48.5 and December’s 47.9. It was also the first expansion, gauged by a number north of 50, in 12 months. Exports also supported the big beat as did prices that are climbing at a faster score of 59 relative to the previous report’s 58.5, which is lifting interest rates intraday via loftier inflation expectations. But the buoyancy among goods producers is occurring amidst continued headcount reductions, with the employment segment of the print posting a contractionary reading of 48 after December’s score of 44.8, suggesting that job losses are slowing.
Buy America Could Mean More Losses for Gold, Silver
The return of “Buy America” sentiment is poised to continue weighing on the performance of precious metals on balance. Indeed, gold and silver are likely to decline further subsequent to a ferocious rally that was initially sparked by fundamentals but has detached from the driving themes of “Sell America” alongside a focus on relatively accommodative global central banks that enable excessive fiscal deficits and generate currency debasement as a result. Bids also strengthened due to safe-haven and store of value characteristics against the backdrop of mounting geopolitical tensions. Since then, however, the red-hot advance has become more speculative in nature and prices have climbed especially fast without much justification, potentially setting up the stage for a painful disappointment for those that bought at peaks. The continuation of greenback appreciation and the potential for simmering apprehension regarding foreign relations are additionally major threats that can lead to persistent weakness following record gains. The migration from quick jumps, brisk crashes and prolonged flat periods has already plagued the assets multiple times throughout their long histories.
International Roundup
China’s Manufacturing Sector Produces Mixed Results
After barely climbing out of contraction in December, China’s manufacturing sector grew at a slightly faster pace this month, but business confidence fell marginally, according to the RatingDog China Manufacturing PMI. The country’s government provided PMI, which places a heavier emphasis on domestic demand, however, depicted a sector that has slipped back into contraction. The RatingDog print from S&P Global climbed from 50.1 to 50.3, exceeding the economist consensus estimate which was anticipating a flat figure. Meanwhile, the National Bureau of Statistics’ (NBS) manufacturing gauge sank from 50.1 to 49.3 and missed the economist consensus estimate of 50.
Regarding the S&P release, factors that contributed to the positive result included the following:
- Output climbed in response to accelerating growth of new orders, including requests from foreign markets
- Firms expanded their payrolls for the first time in three months to handle larger workloads
- Manufacturers increased their purchasing of raw materials and other inputs to meet the rising demand.
- Improved efficiency and expanding payrolls helped firms reduce their outstanding orders for the first time in eight months.
- Supply chains were stable with no change in average lead times
- Goods producers passed higher input costs onto customers by raising their gate prices
Headwinds included heftier input costs. Metals, in particular, became more expensive with the commodity market surging as a result of strong demand for gold, silver, copper and other items. While business confidence remained positive, it sank to the lowest level in nine months. Firms expressed concerns about rising input costs and global economic growth.
Unlike the S&P gauge, the NBS index was hindered by domestic and foreign orders falling from 50.8 and 49 to 49.2 and 47.8. The official service PMI, which tracks construction and services, also sank, dropping from 50.2 in December to 49.4.
Singapore Manufacturing Expands
The Singapore PMI from the Institute of Purchasing and Materials Management ascended to 50.5 last month, up 0.2 points from December. New orders, expanding exports and factory output all contributed to the positive print. The subcategory of electronics, which is the largest within the headline, led the gains, climbing from 50.9 to 51.1. Despite the encouraging headline results, businesses said they and their providers are avoiding shipping through the Red Sea and Suez Canal in response to growing geopolitical turmoil. This change has made transit time and turnaround schedules longer.
As Manufacturing Optimism Picks Up
A net weighted balance of 11% of Singapore manufacturers anticipate improving business conditions during the first half of this year compared the fourth quarter of 2025, according to the country’s Economic Development Board. The result is a considerable improvement from the preceding period’s 8%. For the most recent release, the electronics cluster, with a net weighted balance of 33%, was the most positive with AI driving requests for semiconductors. Growing demand for aircraft maintenance and repair, furthermore, led to the transport engineering clusters having the second highest result at 10%. It was followed by the 8% result for the biomedical manufacturing group due to expectations for loftier export activity.
UK House Prices Bounce Back
After a monthly decline in December, UK home prices rebounded at the start of the year, according to the Nationwide HPI. House values were up 0.3% month over month (m/m), matching the economist consensus estimate after December’s 0.4% slip. The index was also up 1% year over year (y/y), which exceeded the consensus estimate and accelerated from the 0.6% rate of appreciation in the preceding period. In a separate report, Nationwide noted that affordability has improved slightly with wage growth outpacing residential price increases.
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