US JOLTs Report in Focus After ISM Manufacturing Surge

The US manufacturing sector extended its recent run in July, with the ISM index rising to 55.6 from 53.3. That beat the consensus forecast of 54.0 and followed a similar uptick in the PMIs. Within the details, new orders and employment improved while the prices index moderated slightly. The production index jumped to 58.5, the strongest reading since November 2021. The order-inventory balance also continued to improve, pointing to a need for further output increases, the ISM report showed.

Today the focus shifts to the June JOLTs report. Job openings have increased modestly this year, historically a predictor of rising wage cost pressures. June trade balance data is also due in the afternoon; preliminaries pointed to a stable deficit from May. Fed hawk Schmid, a non-voter, speaks overnight.

Fed Governor Williams said he still expects inflation to cool gradually and reach the 2% target on a sustained basis by 2028, assuming energy prices and tariffs have peaked. He described policy as "well positioned." He stressed the Fed would hike rates if inflation does not slow as expected, Williams told reporters.

Oil markets offered a mixed picture. Brent crude traded slightly higher overnight, back above $84 a barrel, holding most of Monday's decline. The move came amid conflicting headlines on whether US-Iran talks have resumed. President Trump called his latest offer of talks a "final chance" for Iran. Iran denied all discussions beyond those held with Oman regarding the Strait of Hormuz.

In the euro area, the final July manufacturing PMI came in at 51.9, only marginally below the preliminary 52.0 and still higher than June's 51.4. The release confirmed the preliminary picture of a rebound in manufacturing activity. Output rose further and factory price pressures eased, the report showed. New orders rose only modestly and employment remained weak.

Equities started August on a positive note, with fresh all-time highs for several MSCI world indices. The move was driven by a strong sector rotation, combining relief in software, which has recovered 16% over the past week, with lower oil prices following more constructive rhetoric around Iran. The cyclical rotation that has played out over the past three sessions continued. Several defensive sectors traded lower despite the solid index gains. In Asia this morning, sentiment is weaker. Scepticism around Asian tech and semiconductors weighed on regional markets. Asian equities traded lower even as US and European futures moved modestly higher.

MSCI Inc., the index provider, carries an Alpha Score of 46 out of 100, a Mixed label, according to the proprietary model. The stock page is available here.

Broad-based yields declined, and EUR/USD remained above 1.15 over the session. Cooling tensions between the US and Iran held Brent crude below $85 a barrel. The EUR/USD profile shows the pair trading with a slight upward bias, though the dollar remains underpinned by the solid ISM print.

Denmark adds a European twist. Danmarks Nationalbank releases its FX reserve figures for July at 17:00 CET. The central bank intervened in June for the first time in more than three years to curb the upward pressure on EUR/DKK. The pair has continued to trade at an elevated level, and the market will look to see whether this prompted more intervention. If it did, speculation about a unilateral rate hike by DN over the coming year could intensify, traders said.

The US data calendar today is dominated by the JOLTs report, which will give the next read on the tightness of the labour market. The ISM already showed employment improving. JOLTs will provide a more direct gauge of wage pressure. The Fed's Williams has already laid out the conditions for further tightening. A strong JOLTs number could reinforce that view, economists said. The report is due at 14:00 GMT.