US PMI surveys point to softening jobs market

Preliminary PMI data for the US came in better than forecast in November, with the composite PMI unchanged from October at 50.7 despite a softening in the manufacturing PMI to 49.4 from 50.0 in October. The decline in manufacturing output in November may have been due to the impact of the autoworkers’ strike, but this was offset by an improvement in the services PMI to 50.8 from 50.6 in October. However, both the manufacturing and services PMI showed a decline in employment this month, as firms reported softer demand and elevated cost-pressures. The decline in the services employment index was the first since June 2020.

Germany’s GDP contracted -0.4% y/y in the final print for Q3, with private consumption contracting -0.3% q/q. This was offset by some growth in government spending and stronger than forecast capital investment at 0.6% q/q in Q3. Separately, the IFO business climate index remained consistent with recession in November, even as it improved slightly from October to 87.3.    

The market focus this week will be on the second print of US GDP for the third quarter, as well as personal income and spending data for October. Preliminary inflation data for November in the Eurozone will also be closely watched.

Today’s Economic Data and Events

19:00 US new home sales (Oct) forecast 723k (-4.7% m/m)

Fixed Income

• Saudi Arabia raised USD 11bn through a 10-year syndicated loan at the end of last week. The budget recorded a deficit of around -3.7% of GDP in the year through September, and while this may narrow in Q4 on higher oil prices, the budget is likely to remain in deficit for the full year.
• With US markets only open for half the day on Friday, 10y yields ticked up to close the week at 4.47%, up from 4.44% the prior week. 2y yields rose 5bp on Friday to 4.95%, up 6bp w/w.
• In Europe, the biggest mover last week was the UK, with 10 gilts up 18bp w/w to end the week at 4.28%, after the Bank of England’s chief economist warned that inflation pressures remained at “very elevated” levels. 

FX

• The USD weakened against major peers last week, with Bloomberg’s USD index down almost 0.5% w/w. Sterling was the main beneficiary, gaining 1.1% w/w against the greenback, while the euro gained 0.2%.
• The commodity currencies also gained against the dollar last week, with AUD and NZD up 1.1% w/w and 1.4% w/w respectively. 

Equities

• US equity markets were largely unchanged during a short Friday trading session. It was a positive week overall however, with the S&P500 gaining 1.13% w/w and the Nasdaq composite up almost 1% w/w.
• European indices also rose last week with the euro Stoxx 50 up 0.7% and the CAC40 up 0.8%. The UK’s FTSE100 lost -0.2% w/w.
• In the MENA region, the UAE and Saudi equity indices were slightly in the red w/w, while Oman and Bahrain equity indices rose 1.0% and 0.3% w/w respectively. Egypt’s EGX30 index gained 1.6% last week. 

Commodities

• WTI declined by almost -0.5% last week to USD 75.54/b, while Brent was largely unchanged w/w despite losing -1% on Friday to close at USD 80.58. The November OPEC+ meeting was delayed to 30 November over disagreement on production targets for African members and will now be an online meeting instead of in-person.