This morning, manufacturing PMI data for China was released
|Market movers today
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In the US, focus will be on the ISM manufacturing index figure for November today. We estimate the index increased to 53.3 in November from 51.9 in October in line with the Markit PMI manufacturing index, which continued to show strong readings last week.
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US initial jobless claims will also attract some attention ahead of the US jobs report tomorrow.
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We have FOMC Member Kaplan (‘dovish’ with 2017 voting right) due to speak today.
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In the euro area, the main release is the unemployment rate for October. The unemployment rate has plateaued at 10% since July, but we expect the October figure to fall to 9.9%, as latest survey indicators including the PMI employment index have remained strong. Data for the manufacturing PMIs for Spain and Italy for November is also due out. The latter will be of special interest, as the population’s impression of economic conditions could influence their vote on the upcoming constitutional referendum on Sunday.
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In the UK, the PMI manufacturing index for November is due to be released today. The index rebounded significantly after the Brexit vote, supported by the weaker GBP and higher global PMIs, and we expect PMI manufacturing to increase further to 55.0 for November (consensus: 54.4).
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Scandi countries will also publish PMI data. See next page.
Selected market news
The main event driving markets has been the OPEC deal agreed in Vienna yesterday. After weeks of negotiations, OPEC members have agreed to lower the output to 32.5mb/d by 1 January 2017. However, the deal is contingent on non-OPEC producers agreeing to contribute with 600kb/d of output cuts at a meeting on 9 December – see Flash Comment International - Oil deal more important for OPEC's reputation than the oil market, 30 November 2016. The announcement led oil prices to rally and Brent crude is up by 1% this morning, trading above USD52/bl. We expect higher global economic growth and inflation to support growth in oil demand in the future and project Brent crude to rise to USD58/bl in Q4 17.
Following the announcement, energy shares also gained, while the US dollar and US bond yields rose sharply on the prospect that resulting inflationary pressures will lead to higher interest rates. USD/JPY touched a 9.5-month high of 114.830, causing the Nikkei to rally by 2%, along with other Asian equity markets.
This morning, manufacturing PMI data for China was released. Activity in China's manufacturing sector grew more than expected in November, expanding at its strongest pace in more than two years. The ‘official’ NBS manufacturing PMI showed a marked increase to 51.7, whereas the Caixin manufacturing index fell back slightly to 50.9. PMI manufacturing readings have been very strong in recent months and stronger than we expected, driven by an even stronger boost from construction and infrastructure than we projected this year. Despite the indication that China's manufacturing sector has picked up over the past months, we believe the boost from infrastructure is likely to fade soon and look for a peak in PMI data before too long.
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