The markets are experiencing a period of calm this week, following a month of strong performance in November.
Upon initial inspection, reports of US factory orders came in at a disappointing level, a survey showed on Monday. The data revealed that factory orders fell 3.6% on month in October after a downwardly revised 2.3% in September. Illustrating that high interest rates may now be taking their toll on spending, the data marks the largest decrease in manufacturing since April 2020 and added to speculation of a slowdown in Q4. However, it is worth noting that these figures are largely shaped by a particularly volatile category – non-defence aircraft and parts – that are underpinned by changing quantities of orders for Boeing month on month. Excluding transport, orders fell by only 1.2%, with other industries even making gains, suggesting that the headline may have been more sensationalist than first thought. The US’ services sector also enjoyed a small increase in November for the eleventh straight time, with services PMI coming in at 52.7. Markets will be looking to key labour market data releases, such as US payrolls, in the coming week after Fed Chair Jerome Powell hinted this week that policy rates may have peaked.
Important PMI data was also released this week for China and the UK. Caixin China General Service released on Tuesday showed that activity expanded in November, rising to 51.5 from 50.4. The Caixin survey covers small and medium-sized companies and uses a larger sample than the official survey, providing a more comprehensive insight into China’s private sector. Economists are maintaining off of the back of the release that, together with pleasing PMI manufacturing figures, China’s economy is making great healing and recovery progress. The data also joins the slow but sure increase in consumer spending over the last few months and positive market sentiment.
Over in the UK, services in November saw an uptick to 50.9 from 49.5 in October –expanding for the first time in four months. Factors helping to curtail the lull in sales include more demand for export orders from the US that have offset the lack of consumer confidence in the UK following the Bank of England’s rapid monetary policy tightening cycle that has only recently paused. Retail sales also increased in October by 2.7% in annual terms, although this was below last year’s more substantial figure of 4.2%.
Still to come this week we have Eurozone GDP, US initial jobless claims and non-farm pay rolls and Chinese CPI.
Nicola Tune, Portfolio Specialist