US PMI points to continued expansion

The October US S&P composite PMI print marks the sixth consecutive month of readings equal to or above a value of 54, pointing to a sustained expansion. The headline measure rose to a value of 54.3 in October, from 54 in September, with gains in both the manufacturing and services sub-components. The manufacturing PMI improved to a value of 47.8 in October from 47.3. The services index rose marginally, rising to 55.3 from 55.2 in September.

US initial jobless claims fell for a second week, dropping 15k to 227k in the week ending October 19. The decline in initial claims was well below consensus expectations for a marginal rise to 242k, with the drop taking the measure back to pre-hurricane levels.

The October Eurozone composite PMI print continues to suggest a contraction in private sector activity. The headline measure rose marginally, to a value of 49.7 from 49.6 in September, with the manufacturing and services sub-components moving in opposite directions on the month. The manufacturing PMI improved to a value of 45.9 in October from 45 the month prior. The services measure remained above the neutral-50 mark but dropped to a value of 51.2 in October from 51.4. On a country basis the composite PMI for France fell further, dropping to a value of 47.3 from 48.6 in September, with declines in both the manufacturing and services components. In contrast the PMI for Germany rose to a value of 48.4 from 47.5 in September, with increases in both the manufacturing and services components.

The UK composite PMI fell in October, dropping to a value of 51.7 from 52.6 in September. There were declines in both the manufacturing and services components, although both remained above the neutral-50 mark. There were also declines in new orders and business optimism, likely driven by uncertainty around the UK budget, due next week.

Saudi Arabia has released its monthly international trade figures for August, showing that oil exports stood at SAR 65.3bn (USD 17.4bn), down 5.6% m/m and 15.5% y/y. Oil accounted for 70.3% of total exports of SAR 92.8bn, compared with 75.1% in August 2023. August’s oil exports saw the largest y/y decline so far this year as production curbs and lower global crude prices weighed on exports, but with Brent averaging lower still in September the next reading will likely see an even greater fall. Within non-oil exports, chemical products accounted for the largest share at 25.8%, and were up 9.3% y/y, followed by plastics, rubber & their products at 23.9%. Imports were dominated by machinery, electrical equipment & parts, at 26.3% and up 5.6% y/y.

Today’s Economic Data and Events

• 12:00 GE IFO business climate survey (Oct). Forecast: 85.6
• 16:30 US durable goods orders (Sept). Forecast: -1% m/m

Fixed Income

• US treasuries rallied on Thursday, curtailing the sell-off seen thus far this week. The 2yr yield was flat at 4.0787%, while the 10yr yield fell 3bps to 4.2118%.
• Major European bond market yields moved lower, with the exception of Gilts, which rose 4bps to 4.2358%. The yield on the 10yr Bund fell 4bps to 2.264%.

FX

• The dollar fell on Thursday, with the spot index reversing the previous day’s gain, falling 0.36%. EURUSD rose 0.43% to 1.0828, while GBPUSD gained 0.42% to 1.2975. USDJPY fell 0.6% to 151.83.
• Moves in commodity currencies were mixed against the dollar. USDCAD gained 0.14% to 1.3855. AUDUSD increased 0.09% to 0.664 and NZDUSD rose by 0.17% to close at 0.6015.

Equities

• Tech-heavy US equity markets rallied on Thursday, with bumper Tesla profits boosting the “magnificent seven”. The S&P 500 gained 0.2% and the NASDAQ rose 0.76%. The Dow Jones fell 0.3%.
• European equity markets also closed higher on the back of positive earnings reports. The EuroStoxx 50 index gained 0.26%, the CAC 40 rose by 0.08% and the DAX increased 0.34%. The FTSE 100 gained 0.13%.
• The DFM was flat on the day, while the ADX rose 0.13%.

Commodities

• Oil prices fell again on Thursday, spurred by hopes of a cooling in geo-political tension. Brent futures dropped 0.77% to USD 74.38/b, while WTI declined by 0.8% to USD 70.19/b.