Better-than-expected manufacturing data provided a short-ter...

Better-than-expected manufacturing data provided a short-term boost to risk markets, but inflation concerns have re-emerged!

Let's take a look at the current performance of various assets in the financial markets. Tonight’s ISM manufacturing data unexpectedly improved, recording at 52.6, which is higher than both forecasts and previous readings, and also above the 50-mark that separates expansion from contraction. This indicates that US manufacturing has transitioned from a contraction phase into an expansion phase, a sign of manufacturing recovery.

Regardless of how reliable the authenticity of the data is, this serves as a short-term sentiment booster for the current market. Of course, the sustainability of this boost remains questionable.

The US dollar continues to strengthen, and gold prices are falling in tandem. However, the movement in gold has remained relatively stable without significant declines, indicating that the short-term selling of gold to cover leveraged positions has slowed down.

Yields on the long end of US Treasury bonds have risen. Given that the current macro market is trading based on this set of manufacturing data, the bond market is naturally pricing in concerns about future inflation. The increase in 10-year yields has outpaced that of 30-year yields, indicating that the market's medium-term inflation concerns are higher while long-term concerns ease, consistent with earlier market expectations.

The four major US stock indexes turned positive, driven by economic factors. Although at this stage, it still represents a positive boost. The SPHB/SPHQ ratio rose to around 1.57, reflecting improved risk appetite. The VIX index dropped significantly to near 16.19, entering a mildly optimistic phase with reduced volatility risks.

This strong manufacturing data was quite 'interesting.' At this juncture, the unexpected shift from contraction to expansion in manufacturing data has sparked expectations of a manufacturing recovery, leading the market to anticipate a stronger US economy. While short-term inflation concerns have emerged, overall, it has boosted the dollar and stabilized the stock market, making it an 'unexpected' positive for risk markets. There’s no need to dwell on the authenticity of the data; instead, focus on how long this positive effect will last.