North American News
Small-Cap Surge: Russell 2000 Index Rockets to Impressive Closing Heights in Market Rally
- Russell 2000 wish some outperformance
Closing changes:
- S&P 500 +0.6%
- DJIA +0.8%
- Nasdaq Comp +0.6%
- Russell 2000 +2.9%
- Toronto TSX Comp +1.0%
Atlanta Fed Q4 GDPNow 1.2% vs 1.8% prior
- Atlanta Fed tracking estimate falls
The latest tracker from the Atlanta Fed fits into the market’s narrative of falling growth. The problem would be if it falls below 0% but 1.2% is still fine.
“After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth decreased from 2.7 percent and -2.7 percent, respectively, to 1.8 percent and -3.2 percent,” the release said.
US November ISM manufacturing PMI 46.7 vs 47.6 expected
- ISM manufacturing PMI for November 2023 highlights
- Prior report 46.7
- Prices paid 49.9 vs 45.1 prior
- Employment 45.8 vs 46.8 prior
- New orders 48.3 vs 45.5 prior
- Inventories 44.8 vs 43.3 prior
- Production 48.5 vs 50.4 prior
Comments in the report from respondents:
- “Economy appears to be slowing dramatically. Customer orders are pushing out, and all efforts are being made to right-size inventory levels, both to mitigate carrying costs on pushed-out orders and to load up on inventory where costs are exploding, like cold-rolled steel.” [Computer & Electronic Products]
- “Starting to feel softening in the economy, with labor still a challenge to backfill critical roles. The 2024 forecast looks challenging, specially from a cost perspective.” [Chemical Products]
- “Nearly all microchip supply issues have been resolved, finallybringing an end to the three-year chip shortage.Material prices are remaining relatively flat. Supply chain issues continue in several areas, resulting from difficulties during the United Auto Workers (UAW) strike.” [Transportation Equipment]
- “Our executives have requested that we bring down inventory levels considerably, and it has started causing customer shortages. Both finished goods, and low inventories of raw and packing materials are creating issues in fulfilling customer demand, and in some cases causing serious (production) delays.” [Food, Beverage & Tobacco Products]
- “The end of the major construction season and an early pullback in customer capital expenditures purchases have resulted in a lower backlog in the fourth quarter.” [Machinery]
- “Automotive sales still impacted by UAW strike. Still waiting for orders to come in, and we also need to work down inventory levels that increased during the strike period. This will most likely happen in December.” [Fabricated Metal Products]
- “Customer orders have pushed into the first quarter of 2024, resulting in inflated end-of-year inventory.” [Miscellaneous Manufacturing]
- “(Our situation is) good but guarded, as next year is hard to predict. There are undertones of uncertainty in the market and the impact of inflation on maintenance and project costs has become apparent.” [Nonmetallic Mineral Products]
- “Customers back online after the UAW strike. Consuming inventory that was built as a strike bank. Still (having) issues with hiring quality candidates for both hourly and salaried positions. Current inventory levels are too high, but the order book remains strong.” [Primary Metals]
- “Elevated financing costs have dampened demand for residential investment. Our business has been negatively impacted through reduced new orders for our products and services. We are purchasing less for production and finished goods inventories.” [Wood Products]
US S&P Global manufacturing PMI final for November 49.4 vs 49.4 prelim
- S&P global manufacturing PMI for November 2023
- Flash estimate was 48.6
- Prior was 50.0
- New orders fell into contraction
- Goods producers noted that, although only marginal, the decrease in new sales was linked to weak client demand, economic uncertainty and customers continuing to run down stock levels
- Input costs rose at a ‘notably’ slower pace
- Employment fell for the second successive month
Chris Williamson, Chief Business Economist at S&PGlobal Market Intelligence, said:
“US manufacturers reported yet another tough month inNovember. Output barely rose as inflows of new work showed a renewed decline, hinting at little – if any – contribution to fourth quarter GDP from the goods-producing sector.
“Orders have in fact risen in only three of the past 18 months, reflecting a prolonged period of subdued post-pandemic demand, in turn linked to consumers switching their spending to services such as travel and recreation, and business customers reducing excess inventories which had been accumulated during the supply concerns of the pandemic.
“Encouragingly, there are some signs of the inventory cycle starting to turn, with producers of intermediate goods (inputs supplied to other firms) now reporting modest order book growth.
“US producers nevertheless continue to focus on cost cutting by trimming headcounts, and have now taken the knife to payroll numbers for two consecutive months. Barring the early months of the pandemic, the survey has not seen such a back-to-back monthly fall in factory employment since 2009.
“The decline in employment could feed through to weaker consumer spending, but will also reduce wage bargaining power.
“Lower wage pressures, combined with a marked cooling ofraw material input cost inflation, have already fed through toa lowering of average factory selling price inflation for goods to a rate below the average seen in the decade prior to the pandemic, the rate of increase dipping again in November to help further lower consumer price inflation in the months ahead.”
US October construction spending +0.6% vs +0.4% expected
- US October construction spending
- Prior was +0.4%
Powell: FOMC is ‘moving forward carefully’ as risks around rates becoming more balanced
- Comments from the Fed chair
- It’s premature to say that mon pol is restrictive enough
- Fed will raise rates if needed to lower inflation
- Fed is making rate decisions meeting by meeting
- Uncertainty over economic outlook is ‘unusually elevated’
- Fed funds range well into restrictive territory
- Fed has made considerable progress in lowering inflation
- Welcomes recent softening in inflation data
- Need to see more progress on lowering inflation to 2%
- Wage growth still high but moderating to more sustainable levels
- Unemployment up but still historically low
- As the demand- and supply-related effects of the pandemic continue to unwind, uncertainty about the outlook for the economy is unusually elevated
Key line:
“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so.”
Powell Q&A: Inflation is still well-above target but moving in the right direction
- Comments from the Federal Reserve chairman
- We’ve been surprised on the upside this year with growth
- Inflation is still well-above target but moving in the right direction
- People who dropped out of the labor market in the pandemic came back in 2023 and we had more immigration
- We think the right thing to do right now is to move carefully
- It will be awhile before we understand how AI impacts the economy and whether it adds to jobs or displaces them
- As long as unemployment remains low with wages rising, some spending will continue
Fed’s Goolsbee: Inflation is coming down exactly as we want
- Comments from the Chicago Fed President
- We are on track to 2% inflation
- Housing inflation is what I’m watching, if it comes down to 2%, then we will be on the right path
- Labor market is very strong
- If shocks come, we’ll figure it out
- Asked about what he sees as the biggest risk to the US economy in the coming year, says a ‘meltdown’ in China
JP Morgan’s bear S&P 500 forecast: Global growth deceleration, policy volatility
- JP Morgan predicts S&P 500 drop to 4,200 by end-2024
A little more on this, via a Bloomberg report:
- JPM has the gloomiest forecast so far among its peers
JPM citing:
- global growth decelerates
- household savings shrink
- geopolitical risks remain high
- national elections including those in the US that could add to policy volatility
- “Absent rapid Fed easing, we expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed”
Via Bloomberg:
Canada November S&P Global manufacturing PMI 47.7 vs 48.6 prior
- Canadian November manufacturing survey
- Prior was 48.6
- Firms continued to utilise existing input inventories wherever possible in the face of faster input price inflation.
- There were concurrent falls in production and new orders during November
- Output price inflation rose to a nine-month high in November
- manufacturing employment rose slightly in the latest survey period, first gain in 7 months
Commenting on the latest survey results, Paul Smith,Economics Director at S&P Global Market Intelligence said:
“Once again, the Canadian manufacturing PMI revealedsome of the broad-based challenges facing the economy heading towards the end of the year. On the one hand, output and new orders remain mired in contraction territory, linked in part to a broader-based global industrial weakness which is limiting demand and sales.Destocking remains prevalent across the supply chain,and client budgets are stretched.
“However, inflation remains stubbornly persistent, with both price indices picking up since October. Althoughinflation rates remain well down on previous year’shighs, both vendors and manufacturers alike remain willing to push cost increases downstream to clients. This suggests there remains some work to do to fully eradicate systematic price pressures, a situation made more complicated by a still relatively healthy labour market.”
Canada November employment +24.9K vs +15.0K expected
- Canadian November 2023 jobs report
- Prior +15.0K
- Unemployment rate 5.8% vs. 5.8% expected — highest since January 2022
- Prior unemployment 5.7%.
- Full-time employment +59.6K vs -3.3K last month
- part-time employment -34.7K vs. +20.8k last month.
- Participation rate 65.6% vs 65.6% last month.
- Average hourly wages permanent employees 5.0% vs 5.0% y/ last month
Employment increased in manufacturing (+28,000) and construction (+16,000). There were declines in wholesale and retail trade (-27,000) and finance, insurance, real estate, rental and leasing (-18,000).
Commodities
Gold touches an all-time high at $2075
- Brief visit to all-time highs
This is the moment of truth for gold. I like the setup here, as I always do on December seasonals. In addition, the Fed is going to pivot dovishly and the dollar looks out-of-gas.
Gold is now up $35 on the day at $2071.
The oil market is fed up with production growth
- WTI crude oil finishes down $1.89 to $74.07
It’s a buy-everything market today, with one big exception.
Oil fell sharply today in the past two hours.The catalyst: US oil drilling rigs rose by 5 in the latest Baker Hughes weekly count.OPEC+ now has around 5 million barrels per day of spare capacity and there’s no sign yet of US production growth falling (let alone declining).There had been hopes that demand growth next year would absorb OPEC spare capacity but even OPEC is only forecasting 2.5 million barrels per day in demand growth; so it would take another year like that to tighten the market.
Baker Hughes US oil rig count 505 vs 500 prior
- US drillers add rigs
- Gas rigs 116 vs 117 prior
Goldman Sachs comments on risks to Brent forecast; solid demand, US supply slow down
- Goldman Sachs expects Brent crude oil in the $80-100 range in 2024
Goldman Sachs comments on the additional OPEC+ cuts into Q124:
- says “still see risks to unchanged December 2024 Brent forecast of $93/bbl as tilted moderately to the downside”
- Expects solid demand growth, slowdown in US supply growth, low OPEC supply to keep Brent in the $80-100 range in 2024
OPEC+ oil output, “lack of clarity around the new agreement” sparks oil market uncertainty
- ANZ’s response summarises how much of the market is viewing the result of the OPEC+ meeting on Thursday:
- Crude oil jumped on reports that the OPEC+ alliance had agreed to a deeper 1mb/d cut to already lower production levels. However, prices failed to hold those gains amid a lack of clarity around the new agreement.
- There was no group communique listing the individual changes to quotas. Each country announced its own reductions.
- Saudi Arabia said it would extend its voluntary 1mb/d cut through the first quarter of 2024.The absence of a comprehensive breakdown with only a select number of countries detailing their reduction failed to convince the market.
- The lack of a published agreement also raises the prospect of some producers not adhering to their voluntary reductions. Nevertheless, if output is cut to the extent they promise, the crude oil market should remain tight.
Confusion and disobedience: Angola’s bold move challenges OPEC+
- Angola rejects OPEC’s new quota, plans to produce above limits.
Angola is planning to ignore its quota, which is not something OPEC members do often at all, not publicly at least According to a Bloomberg report:
- Angola rejected a new output quota handed to it by OPEC
- said it planned to breach it
- “We will produce above the quota determined by OPEC,” Angola’s OPEC governor Estevao Pedro said in an interview on Thursday.”It is not a matter of disobeying OPEC; we presented our position, and OPEC should take it into consideration.”
Oil: US modest 2.7 million barrel purchase for its Strategic Petroleum Reserve (SPR)
- Learn more about the significance of this move and the capacity of the Reserve.
ICYMi – there was news out of the US on Thursday afternoon that 2.7 million barrels of oil had been purchased towards replenishing its Strategic Petroleum Reserve.
Given the vast number of barrels of oil pumped out of the Reserve this purchase is a drop in the bucket:
- November 2021 release of 50 million barrels announced
- March 2022 30mn barrels and then 180mn barrels (one a day for 180 days)
The SPR can hold around 400+mn barrels.
EU News
European equity close: Continuing where we left off in November
- Closing changes from the main European bourses
Europe has picked up where it left off last month:
- STOXX 600 +1.0%
- German DAX, +1.1%
- France CAC +0.5%
- UK FTSE 100 +1.0%
- Spain’s IBEX +0.7%
- Italy’s FTSE MIB +0.6%
Eurozone November final manufacturing PMI 44.2 vs 43.8 prelim
- Latest data released by HCOB – 1 December 2023
As a whole, the decline in output, new orders, and inventories eased in November but the downturn in the manufacturing sector remains strong in the euro area. The thing to note about the report this month is that employment conditions are starting to be hit much harder and that could show up in the labour market data in the months ahead. HCOB notes that:
“November has not been the prettiest, and this does not refer only to the weather but also to the situation in the manufacturing sector of the eurozone. Output is still on the decline, and firms have trimmed their staff for a sixth straight month. Sure, almost all the sub-indices have perked up a bit. However, the improvements are mostly timid, lacking the dynamism needed to declare an upward trend.
“The consumer goods sector seems to be in a somewhat better position than intermediate and investment goods. This is a familiar pattern in recessions, where a significant portion of private consumption tends to maintain its stability. In contrast, the cyclical nature of intermediate and investment goods exposes them to economic downturns. The script might flip when the tide changes, with these sectors potentially outpacing consumer goods in a manufacturing recovery. Yet, the current state of the PMI indexes suggests that this turning point might still be a distance away.
“Could we take a glimmer of hope from new orders? The corresponding index, stagnant at more or less 39 points for a four-month stint, has finally made a move, reaching a six-month high. As one-month shifts demand caution, it is prudent to hold off on declaring this to be a trend until we see another month or two of upward movement.
“While the downturn is broadly based across the eurozone, dynamics differ among the top four economies of the currency union. Germany stands out as the single country where the fall in output is softening, while the others are experiencing a deepening of the crisis. In terms of new orders, Germany, France, Italy and Spain witnessed slowdowns in new order declines, but to varying degrees. These heterogeneous movements show that the recovery, which will kick in eventually next year in our view, might encounter some resistance in gaining momentum. A crucial barometer for the recovery’s onset will likely be a more synchronized upward movement in the economies PMI indexes, leading to a self-reinforcing reciprocal push among countries.”
Germany November final manufacturing PMI 42.6 vs 42.3 prelim
- Latest data released by HCOB – 1 December 2023
The reading may be an improvement to initial estimates but it still shows that output and new orders are at their weakest in six months. Meanwhile, job cuts are also seen accelerating on the month as the recession in the manufacturing sector is starting to bite at employment conditions. HCOB notes that:
“There is a flicker of hope in the German manufacturing sector. Even though the November data still places the sector in the recession arena, the rate of output decline is tapping the brakes compared to the previous month. Surely it could be premature to conclude that a trend is underway considering it is only the second consecutive month of improvement in the output index. However, almost all activity-related subindices rose, except for the lagging indicator of employment.
“New orders are still sliding at a brisk pace, but we are confident that growth in new orders is not very far away. The reduction in new orders has eased for three months straight, mirroring similar trends in export orders and purchases of inputs.Still, a strong rebound is not what we expect as the world economy – the driver for German manufacturers – will mostprobably grow only modestly again next year.
“We see tentative signs that the stock cycle is about to turn the corner. Stocks of purchases are still shrinking, but the index has increased significantly after lingering at levels reminiscent of past recessions, from the internet bubble burst to the euro crisis and the Covid-19 pandemic. If we take a cue from these historical phases, companies might just start to normalize their stocks during the first half of next year. This would be supportive to growth.
“The current production situation remains gloomy for firms producing intermediate goods. Here, output plunged further. By contrast, producers of consumer goods and investment goods scaled back output at a gentler pace compared to previous months. The forward-looking new orders index paints a somewhat brighter picture for the intermediate goods sector, indicating a softer decline than in the other two sectors and the weakest fall overall since April.
“Companies are dialing back on the pessimism when it comes to future output. However, we have to consider that the German constitutional court’s bombshell regarding debt brake compliance was only partly considered during the November survey period. We see considerable downside risk as important investments and subsidies which were to be financed via off-balance vehicles may be dropped. In this respect, the industry might be at the forefront of this judicial budget storm.”
France November final manufacturing PMI 42.9 vs 42.6 prelim
- Latest data released by HCOB – 1 December 2023
Demand weakness continues to be a dampener to France’s manufacturing sector, with employment conditions also starting to worsen at a much more rapid pace. HCOB notes that:
“France’s manufacturing sector continues to suffer with weak demand. High financing costs are hurting goods producers, as is sustained destocking. There are currently no signs to suggest an improvement is near. Accordingly, our HCOB nowcast model signals contraction of -0.7% in the manufacturing sector for the fourth quarter, with a drag especially coming from the capital goods segment.
“Sluggish demand isn’t hitting output as hard — thanks to backlogs of work. New orders continue to decline significantly, so companies are relying on their backlogs of work to support production. As a result, fewer raw materials are being purchased and stored.
“The danger of inflation is still present. input prices stood out in November, with the index rising by around four points – to be marginally above 50 – amid reports of higher material costs. Output prices were still reduced, with the decline exclusively attributable to the intermediate goods segment. Overall, the increase in the input prices PMI could translate into a higher output prices PMI, increasing the risk of greater inflation. Our HCOB nowcast model expects an increase in CPI of 0.2% on a monthly basis in November.
“Overall, demand is expected to stay weak and financing conditions are to stay tight, so manufacturers expect no amelioration any time soon. They see no improvement in the demand situation over the next twelve months, which is also reflected in the employment data from the PMI survey. We can therefore expect further rises in unemployment in the coming months, after official INSEE figures have showed the jobless rate rising to 7.4% in the third quarter this year.”
Italy November manufacturing PMI 44.4 vs 45.3 expected
- Latest data released by HCOB – 1 December 2023
- Prior 44.9
Further demand weakness is adding to the woes in Italy’s manufacturing sector, with employment conditions also seen worsening. On the latter, firms are seen cutting jobs at the fastest rate in 40 months. HCOB notes that:
“Italy’s manufacturing industry is at risk of getting stuck in the recession muck. The HCOB Manufacturing PMI came in shockingly poor at an index value of 44.4 in November. The shrinkage across the sector is extensive, and there’s no clear sign of how the sector could be pulled out of the current recession. According to our HCOB Nowcast, we’re currently anticipating a slight contraction of 0.1% in manufacturing production in the final quarter of 2023.
“Italy’s manufacturing industry is really taking a hit lately. This weakness has particularly intensified for output, quantities of purchases, stocks of purchases, and employment compared to the previous month. The fact that companies are now cuttingworkforce numbers, given the profound shortage of skilled workers, is a cause for concern.It looks like the Italian goods-producing industry is heading for further tough times ahead.
“Although facing challenges, firms can take some respite from falling input prices and speedier supplier deliveries. However, with shrinking output prices and backlogs of work, these improvements offer only limited assistance to the struggling industry.
“Italian manufacturers are grappling with a lack of optimism. The significant downturn in incoming orders, both domestic and foreign, provides no encouraging signals. Despite the sub-index for future expectations pointing towards improvement, it remains below its long-term average, reflecting a rather gloomy outlook. Companies surveyed expressing pessimism attributed it to geopolitical tensions and concerns about sustained lower future demand.”
Italy Q3 final GDP +0.1% vs 0.0% q/q prelim
- Latest data released by Istat – 1 December 2023
- Prior -0.4%
UK November final manufacturing PMI 47.2 vs 46.7 prelim
- Latest data released by S&P Global – 1 December 2023
- Prior 44.8
The revision higher reflects easing downturns in output and new orders on the month. However, similar to the euro area, employment conditions are seen weakening further for UK’s manufacturing sector in November. S&P Global notes that:
“Although the downturn in production eased sharply in November, the latest PMI report brings little festive cheer when the finer details are considered. With new order inflows and exports continuing to fall sharply, and clients destocking, a sustained meaningful growth revival still looks elusive. Manufacturers are preparing for tough times ahead, with their continued caution leading to cutbacks in staffing, inventories and purchasing.
“The underlying sector dynamics further highlight how this combination of high uncertainty and low confidence is impacting performance. The latest scaling back of production was mainly driven by weak business-to-business and capital spending, as output and new orders contracted in both the intermediate and investment goods sectors. In contrast, activity posted a solid uptick at consumer-facing manufacturers.”
UK November Nationwide house prices +0.2% vs -0.4% m/m expected
- Latest data released by the Nationwide Building Society – 1 December 2023
- Prior +0.9%
- House prices -2.0% vs -2.3% y/y expected
- Prior -3.3%
Even with the improvement in the house price index on the month, the average price of dwellings in the UK declined from £259,423 in October to £258,557 in November.Annual house price growth remains weak but is the highest since February this year at least. Nationwide notes that:
“There has been a significant change in market expectations for the future path of Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity.In mid-August, investors had expected the Bank of England to raise rates to a peak of around 6% and lower them only modestly (to c.4%) over the next five years.By the end of November, this had shifted to a view that rates have now peaked (at 5.25%) and that they will be lowered to around 3.5% in the years ahead.”
Spain November manufacturing PMI 46.3 vs 45.5 expected
- Latest data released by HCOB – 1 December 2023
- Prior 45.1
Despite some improvement, Spain’s manufacturing sector remains in contraction as a decline in both output and sales is still proving to be a drag. Job losses are also becoming more evident now, so that is a point of concern for the months ahead. HCOB notes that:
“Spain’s manufacturing sector remains in reverse gear. In November, factory output continued to decrease, revving up the decline a tad faster than the previous month. Other indicators like new orders, purchase of goods and backlog of orders are shrinking too, but at a much slower pace than in October. These indexes partially reversed the falls of the month before. Interpreting a one-off change in the direction of monthly indexes always demands caution. And so do we, as it is the consumer goods sector taking the wheel, while in the investment goods sector, which is a more reliable cyclical indicator, things have worsened instead.
“Producers of consumer goods are growing against the tide. And it looks as if growth in this sector, which started in October may continue as the order situation improved as well. Consumer goods companies are even flexing their muscles by upping their selling prices while input costs fell a bit, supporting profit margins. In addition, it is this sector which is mainly responsible for the fact that overall cuts of employment have softened significantly in November. Contrasting with this more positive development, the intermediate and investment goods sectors both experienced further sharp decreases in output and orders.
“Confidence in the future stays on the positive side, but it’s lingering below the historical average. Asking firms about their worries, political uncertainty was a big issue casting a shadow on sales and production. However, as the much-awaited government formation has taken place in mid-November, political uncertainty may take more of a backseat during the next months.”
Switzerland November manufacturing PMI 42.1 vs 42.0 expected
- Latest data released by Procure – 1 December 2023
- Prior 40.6
The details:
Switzerland Q3 GDP +0.3% vs +0.1% q/q expected
- Latest data released by SECO – 1 December 2023
- Prior 0.0%; revised to -0.1%
Swiss GDP came in as a beat on estimates for Q3 as the services sector helped to offset a stagnation in manufacturing activity. That being said, there was a negative revision to Q2, which now shows a contraction.
Goldman Sachs is forecasting the first ECB rate cut in Q2 of 2024 (vs. Q3 prior forecast)
- Goldman Sachs shaking it up with a forecast for the turning point in the ECB’s rate cycle.
Goldman Sachs has revised its outlook for the European Central Bank,
- it now expects a rate cut from the Bank in the second quarter of next year
- GS had been previously forecasting a Q3 ECB rate cut
The ECB depo rate is currently 4.0%, the first cut is expected to take it back to 3.75%
Asia-Pacific-World News
China November Caixin Manufacturing PMI: 50.7 (vs. expected at 49.8)
- China Caixin Manufacturing PMI exceeds expectations, marking a bounce back into expansion
China November Caixin Manufacturing PMI comes in at a huge beat and much better than October:
- 50.7 to jump back into expansion
- expected at 49.8, prior 49.5
Key points in the report:
- Production returns to growth amid sustained rise in total new work
- Softer reduction in employment
- Business confidence ticks up to four-month high
Summary comments from the report:
- “Overall, the manufacturing sector improved in November. Supply and demand both expanded, prices remained stable, logistics improved, purchasing quantities increased, and manufacturers were more optimistic. However, external demand remained sluggish and employment weak, while manufacturers leaned toward caution in inventory management.
- “The macro economy has been recovering. Household consumption, industrial production and market expectations have all improved. But domestic and foreign demand is still insufficient, employment pressure remains high, and economic recovery has yet to find solid footing.
- “Policies should focus on expanding consumption, increasing income, promoting employment and stabilizing expectations. Considering thateconomic growth in the third quarter slightly exceeded expectations and thebase number for fourth-quarter year-on-year growth is low, achieving the target of around 5% for the whole year looks attainable. Ultimately, policies should aim to lay a solid foundation for long-term economic growth and cultivate long-lasting market confidence.”
Australian November Manufacturing PMI 47.7 (prior 48.2)
- The ‘final’ reading, the flash was 47.7
Judo Bank / S&P Global November Manufacturing PMI comes in at 47.7, in line with the preliminary (flash) result.
Key points made in the report:
- Sharpest fall in new orders since May 2020
- Marginal decline in staffing levels
- Slower rates in inflation signalled
On that point about inflation, this from Warren Hogan, Chief Economic Advisor at Judo Bank in the report:
- “The good news is that the inflation indicators are continuing to improve with both the input and output price indexes down in November.
- “Input prices, essentially an indicator of cost pressures, are showing a gradual easing in recent months after jumping up through the middle of the year. Input prices remain elevated and well above the average levels seen prior to the pandemic.
- “Output prices have all but normalised for Australian manufacturers which while good news for the broader inflation picture, is bad news for manufacturers margins and profits as cost pressure remain elevated.
- “There is strong evidence in the November survey that manufacturers capacity to pass on cost pressures has been compromised by the broader economic slowdown. This is pressuring profitability and business activity and will work to reinforce the slowdown in economic activity already underway.
- “For the RBA these results should be welcome news. The Judo Bank Manufacturing PMI confirms that the economy is respondingto higher interest rates with weaker activity and easing inflationpressures.
- “While the steep decline in new orders since September is concerning, the overall picture painted by the latest Australian manufacturing PMI is of a soft landing for the economy with a meaningful easing in inflation pressures.”
RBA to keep cash rate unchanged next week – Reuters poll
- The latest poll shows 28 of 30 economists expecting the RBA to keep the cash rate unchanged on 5 December
- 28 of 30 economists, including those at the ‘big four’ expect cash rate to remain at 4.35%
- Remaining 2 economists predict a 25 bps rate hike
- Median estimate for first rate cut now seen in Q4 2024 (previously Q3 2024)
RBNZ’s Hawkesby: High, sticky core inflation leaves little room for error
- Comments from Hawkesby
- Need to take seriously that some inflation expectation measures have ticked up
- New Zealand needs a period of very subdued spending
- Vast majority of borrowers able to services their debt at these interest rate levels
Japan data: Q3 Capital expenditure +3.4% y/y (expected +3.4%, prior +4.5%)
- Japan’s Q3 capital expenditure exceeds predicted growth, a promising economic outlook
Japan Business capital spending +3.4% y/y in Q3 2023
- expected +3.4%, prior +4.5%
Business sales +5.0% y/y
- expected +4.5%, prior +5.8%
Company Profits +20.1% y/y
- expected +13.8%, prior +11.6%
Japan data: Final November Manufacturing PMI: 48.3 (prior 48.7)
The final reading has come in at 48.3, down from October but not as much as the preliminary reading indicated.
The key points in the report:
- Output and new orders fall at stronger rates
- Output price inflation eases to softest since July 2021
- Business confidence remains elevated
And, commentary from the report, bolding is mine:
- “The performance of the Japanese manufacturing sector remained downbeat midway through the final quarter of 2023. The headline PMI slipped deeper into contraction territory, largely due to quicker deteriorations in output and new order inflows. As a result, the PMI was at its lowest since February. Panel members often commented on weak customer demand in both domestic and international markets.
- “Inflationary pressures remained elevated in the latestsurvey period, as signalled by a further marked rise in input costs. That said, the rate of inflation eased to a three-month low. Moreover, selling price inflation edged down to the lowest since July 2021.”
Japan data: October Unemployment rate 2.5% (expected 2.6%)
Japan’s jobs market is not in trouble. More jobs than applicants and a falling unemplement rate in these latest figures.
Japan’s largest trade union says formally agreed on 2024 pay hike demand of 5% or more
The Japanese Trade Union Confederation (JTUC, more commonly known as Rengo) says its agreed it’ll demand 5% or more. Talks are held in Spring.
- Every year in Japan, unions affiliated with Rengo hold wage negotiations with employers.
- These negotiations are known as “spring labor offensive” or “shunto” in Japanese.
- The goal of shunto is to negotiate wage increases and other benefits for workers.
South Korea to address “market inefficiencies” in its crackdown on short selling
- South Korea recently news enacted a ban on short-selling shares in the country.
South Korea regulation authorities say they are seeking to address short selling practices that are causing market inefficiencies:
- illegal short selling is a serious matter undermining market credibility
Headlines via Reuters, nothing further.
Cryptocurrency News
Bitcoin price to hit $125,000 in 2024 according to Matrixport research
- Bitcoin is now 20,780 blocks away from the fourth halving event.
- Asset manager Ric Edelman says financial advisors are waiting for BTC Spot ETF approval to provide Bitcoin to clients.
- BTC price is on track to hit its $40,000 target according to a crypto analyst.
Bitcoin is inching closer to the anticipated fourth halving event, scheduled for April 17, 2024, tentatively.BTC price is likely to rally to its $40,000 target; analysts consider this level a “magnet” for Bitcoin.
BTC yielded 2.27% gains in the past week.
Solana likely to extend gains as DeFi airdrop season could boost user base
- Solana ecosystem will see airdrops from projects like Jupiter, Marginfi, Drift, Zeta and Jito.
- Solana users are projected to increase between 30% and 80% from native token launches, according to Messari’s latest report.
- SOL price extends rally, yielding nearly 4% daily gains.
Solana ecosystem is set to experience a surge in activity from decentralized finance (DeFi) projects that offer users airdrops in the following months, according to a report from crypto market intelligence company Messari. A higher user base – together with the gradual increase in weekly active addresses on the layer 1 blockchain – benefits Solana (SOL) token’s valuation, which has risen nearly 4% over the last day and a whopping 59.20% in the last month.
LUNC ranks among trending tokens alongside Dollar pegged stablecoin USTC, eyes recovery
- Terra Classic USD and Terra Luna Classic tokens are trending among market participants after overnight price gains.
- USTC rallied to $0.078 local top after its 2022 collapse, garnering hope among traders.
- LUNC price noted a pullback after yielding 26% weekly gains for holders.
Terra Luna Classic (LUNC) and Terra Classic USD (USTC) both tokens are trending among traders after noting a massive surge in their price.Santiment analysts believe these tokens are gaining popularity after their collapse, likely to see a revival.
LUNC and USTC prices might recover
In 2022, sister tokens Terra USD (UST) and LUNA suffered an implosion when UST depegged. In the aftermath of the event, Terra LUNA was revived as Terra LUNA Classic (LUNC).Terra Classic USD remained de-pegged and the community has been brainstorming ways to establish the stablecoin’s $1 peg again.
Based on data, two tokens, LUNC and USTC noted milestone price rises in the past week. LUNC price rallied 26% in the past week while Dollar-pegged stablecoin USTC attempted a recovery and climbed 200% in the same timeframe.
Milestone weekly gains in the two tokens have resulted in LUNC and USTC emerging as top trending cryptocurrencies. It’s important to note that the two tokens have experienced a pullback in their prices since then.
DYDX price expected to fall further as whales dump tokens after massive unlock event
- DYDX tokens equivalent to 83.2% of the asset’s circulating supply have been unlocked on Friday.
- Large wallet investors holding DYDX sent nearly 7.75 million tokens to centralized and decentralized exchanges in the past 24 hours.
- DYDX price suffered a decline of nearly 5% in the past day.
DYDX, the native token of a decentralized exchange, unlocked 150 million tokens, worth $485 million, early on Friday.Following the event, large wallet investors sent their holdings to centralized and decentralized exchanges. This increases selling pressure on the asset, supporting a bearish thesis for price.
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