E Markets: Mourning

What Happened?

  • Australia November Services PMI 55.1 from 51.1 – better than 51 expected – 5-month highs. There was expansion of 5 of the 9 sectors. Communication services rose 1.6 to 55.8, but property services moderated despite customer demand off 1.3 to 51.8, other drops were in Insurance -2.2 to 46.9, wholesale trade -1.7to 48.3, health/education off 1.3 to 56.9 while strongest sector, hospitality, rose 2.1 to 62.6. Notable also that employment fell 4.4 to 52.9 and input prices fell 3.4 to 59.4 while selling prices rose 2 but are still contracting at 47.8. Sales rose 8.8 to 54.5 and new orders rose 9.4 to 56.8.

  • Australia 3Q GDP rose 0.3% q/q, 2.8% y/y after 0.9% q/q, 3.1% y/y – weaker than 0.6% q/q, 3.3% y/y expected – worst in 2-years. Final household consumption +0.3% q/q, 3.1% y/y – this added 0.2pp to headline – while trade added 0.3pp to growth – mostly due to drop in imports - as terms of trade rose 0.8% q/q, 2.7% y/y. Capex rose just 0.1% q/q, 1.3% y/y – subtracting 0.2pp from growth. Inventories subtracted 0.3pp from growth. 
  • Japan November Services PMI fell to 52.3 from 52.4 – down from 6-month highs. Business confidence rose to 10-month highs with elevated demand helping. The Composite PMI fell to 52.4 from 52.5 – still near 5 ½ year highs. 

  • BOJ Wakatabe: Inflation just halfway to target. "In a case where downward pressure is exerted on the economy again, it may revert to deflation," he warned. "The bank will encourage a rise in the inflation rate to the level that is appropriate for the economy by continuing large-scale monetary easing with the aim of achieving 2 percent inflation." In doing so, the effectiveness of the policy on inflation and the impact on the financial markets and system should be examined closely.

  • China November Caixin Services PMI jumps to 53.8 from 50.8 – better than 50.7 expected – best in 5-months. The Composite PMI rose to 51.9 from 50.5 – better than 50.5 expected – signaling modest expansion. Services saw export sales rise, new orders rose for 2nd month but outstanding business fell for 3rd month. Input costs rose, output prices were unchanged. Confidence for Services was weakests since July – with many citing concern over future demand and competition. 
  • India RBI leaves rates unchanged at 6.5%- as expected. The central bank repeated its target of 4% inflation target to support growth. They noted slowing global economic forces, based on weaker trade and lower demand. The drop in oil also noted, and rally back in INR.  RBI noted strong domestic demand in India and strong business confidence. 

Eurozone November final Composite PMI 52.7 from 53.1 – better than 52.4 flash. The Services PMI 53.4 from 53.7 – also better than 53.1 flash – but still the lowest in over 2-years. Weakness was centered in Germany while France saw gains, Spain was steady and Italy rose slightly. Energy continued to add to input prices, but output prices also rose. Increased volumes helped further job creation but its at six-month lows. Business confidence fell to Aug 2016 lows.  

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