UK PMI beats expectations

The November print of the UK S&P Global/CIPS composite PMI surprised on the upside, with the index rising to 50.1 from 48.7 in October. There were improvements in both the manufacturing and services sub-components, although the manufacturing index remained below the neutral-50 line with a value of 46.7 (from 44.8), while the services index rose to 50.5 (from 49.5). The survey also highlighted a rise in cost pressures, with respondents citing wages and fuel rises as the primary factors.

The Eurozone HCOB composite PMI remained firmly in contractionary territory but did rise slightly more than had been expected. The headline index rose to a value of 47.1 in November from 46.5 in October. There were increases in both the manufacturing and services sub-components, although they also remained below the neutral-50 mark. There was additionally some evidence of a cooler labour market, with the employment index falling below 50 for the first time in 3 years. Underlying the aggregate Eurozone movement, was a small decline in the French composite index to 44.5 in November from 44.6, which was more than offset by an unexpected rise in the German composite PMI value to 47.1 from 45.9 in October.

The Turkish central bank hiked its one-week repo rate by 500bps yesterday, greater than the consensus prediction of 250bps, taking the benchmark rate to 40.00%. This marked the sixth outsize move in a row since Hafize Gaye Erkan took over as governor in June, with a cumulative 2,650 bps of hikes over the period. The bank’s communique explicitly stated that the hiking cycle is set to slow and is likely near its end as it noted that inflation was starting to show signs of moderating, and that ‘the current level of monetary tightness is significantly close to the level required to establish the disinflation course.’ Nevertheless, with annual CPI inflation still at 61.4% in October, a rate cut likely remains some way off given the bank’s ongoing commitment to ‘ensure a decline in the underlying trend of inflation and to reach the 5 percent inflation target in the medium term.’

Japanese CPI, excluding food prices, rose 2.9% y/y in October from 2.8% the month prior. The measure has now been above the BoJ’s 2% target for 19 months. Price pressure was supported by a reduction in energy subsidies and higher hotel prices.

Today’s Economic Data and Events

13:00 GE IFO business climate, November: forecast 87.5

18:45 US S&P Global US composite PMI, November: forecast 50.4

Fixed Income

• US Treasury markets were closed on Thursday for the Thanksgiving holiday.
• There were widespread rises in bond yields across major European sovereign bonds markets on Thursday, in response to better-then-expected PMI numbers from the UK and Germany dimming hopes of rate cuts. Yields on the 2yr Gilt rose 11bps to 4.7017%, and 10yr Gilts rose 10bps to 4.2535%. The 10yr Bund yield rose 6bps to 2.617%.

FX

• Improvements in the UK and German PMI numbers also fueled gains in both Sterling and the Euro. EURUSD rose 0.16% to reach 1.0905, while GBPUSD gained 0.32% to 1.2534.
• Moves in commodity currencies were mixed against the dollar. AUSUSD rose 0.2% to 0.6558, while NZDUSD gained 0.43% to 0.6048. CADUSD saw a marginal gain of 0.06% to 1.3696.

Equities

• US equity markets were closed on Thursday for the Thanksgiving holiday.
• European equity markets rose on Thursday, fueled by gains in energy stocks, even as the Eurozone PMI remained in contractionary territory. The Eurostoxx 50 rose 0.21%, the CAC 40 gained 0.24%, and the DAX was up 0.23%. The FTSE 100 rose 0.2%.
• Locally, the DFM declined 0.3% and the ADX closed 0.05% lower.

Commodities

• Oil prices fell for a second day on Thursday, with continued uncertainty in the oil market about production targets for OPEC+ members. The OPEC+ meeting originally scheduled to take place over the coming weekend has been rescheduled to 30 November. Brent futures fell 0.7% to close at USD 81.42/b.