Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The dollar slid towards a three-year low and US government bonds came under pressure on Monday as weak manufacturing data combined with growing warnings over the sustainability of the country’s debt pile to unnerve investors.
The dollar was down 0.7 per cent against a basket of its trading partners, taking it close to the three-year low it hit in the wake of President Donald Trump’s “liberation day” tariff blitz in early April.
The blue-chip S&P 500 index also dipped after an ISM survey of purchasing managers in the manufacturing sector came in weaker than expected at 48.5 for May — below the 50 level that separates expansion and contraction. The stock benchmark then regained some ground to close the session 0.4 per cent higher.
Gordon Shannon, a fund manager at TwentyFour Asset Management, said the ISM data provided a “hint of tariff uncertainty’s impact on US growth”.
Francesco Pesole, a forex strategist at ING, said the survey was adding pressure to “already very weak dollar momentum”, compounded by “soft” demand for US Treasuries and a re-escalation in trade tensions.
The yield on 30-year US government bonds rose 0.03 percentage points to 4.97 per cent as the price of the debt fell, in the first trading after Treasury secretary Scott Bessent moved to reassure the markets that the country was “never going to default”, amid growing warnings over debt sustainability.
JPMorgan Chase chief executive Jamie Dimon had warned on Friday that the US bond market could “crack” under the weight of Washington’s rising debt load.
The ISM survey was a weaker showing than the previous month, and the fourth consecutive fall in the index, in the latest sign that Trump’s unpredictable trade war was weighing on the world’s largest economy. The US and China have traded accusations in recent days that the other side was violating their trade truce.
The survey also revealed slowing deliveries, as an index based on supplier delivery times climbed to its highest level since June 2022.
“The confusion of trade policies is making it near-impossible for supply managers to source goods efficiently,” said Joe Brusuelas, chief economist at tax and consulting firm RSM US.
“That tells me that we may run into bottlenecks in terms of production, leading to shortages.”
Imports also declined sharply and producers drew down the inventories they had amassed over several months of stockpiling ahead of the new trade levies.
Economists warned that these diminishing stockpiles provided only a temporary shield to rising import costs. “You can only rely on that frontloading for so long,” said Veronica Clark, an economist at Citi.
US metals prices also rose on Monday after Trump’s announcement on Friday that the US would impose a 50 per cent tariff on steel and aluminium imports, double the previous level that his administration had put in place in March. The new levies are set to take effect on June 4.
Prices for aluminium surged, with the regional premium for aluminium delivered into the US Midwest jumping 54 per cent. Steel futures traded on Comex had a more muted reaction, rising 14 per cent in Monday trading. Shares in US steel producers Nucor and Steel Dynamics climbed 10.1 per cent and 10.3 per cent, respectively.
