Weekly wrap: Data releases galore: US jobs, German factory orders and China services – 02.12.2013
Source: Henderson Global Investors
Global stocks continued their steady climb despite a subdued trading week due to Wall Street’s closure for Thanksgiving on Thursday and Friday. A historic deal with Iran to curb its nuclear programme in return for sanction relief on oil led to negative pressure on crude oil prices, which tumbled on the announcement but quickly recovered to end the week 0.4% higher.
Among US data releases, pending sales of existing homes dropped for the fifth consecutive month in October with higher borrowing costs blamed for the slowdown. October durable goods orders declined 2% month-on-month owing to weakness in the defence and aircraft sectors. More positively, the Case Shiller home price index and the Thomson Reuters/University of Michigan November consumer sentiment reading both beat analyst expectations. In bond markets, a $35bn auction of five-year US Treasury notes was well received as investors continued their search for yield. European data was stronger. Eurozone unemployment numbers fell for the first time since 2011 in October and the unemployment rate inched down to 12.1%. Annual inflation also picked up in November rising to 0.9%, up from 0.7% a month ago. Elsewhere, the Bank of England announced that it will scale down stimulus for the housing sector via its Funding for Lending Scheme but will continue to support lending to businesses.
In Japan, stocks reached a near six-year high. Dollar-yen rose above 102, boosting exporters. Also encouraging was news that October retail sales rose by an unexpected annualised rate of 2.3%, while October core consumer prices advanced to a five-year high. Chinese stocks led Asian markets higher. China’s central bank governor said financial reforms would be accelerated while the official purchasing managers' index (PMI) clung on to a 18-month high, ahead of market expectations.
US markets will once again be looking to the US monthly jobs report for clues about asset purchase tapering. Analysts are looking for a smaller non-farm payrolls increase of 183k in November. The Institute for Supply Management’s manufacturing reading and second estimate of Q3 GDP (gross domestic product) will also be scrutinised for the same reason. The initial annualised GDP growth reading of 2.8% is expected to be revised upwards according to a Reuters’ poll. Other highlights include the release of consumer confidence and new home sales data.
Turning to the eurozone, the European Central Bank (ECB) will provide an update on its growth forecasts at its meeting on Thursday, but no change to policy is anticipated. Analysts forecast that a further rate cut and even a deposit rate cut may only be likely if the outlook for inflation weakens materially or if there is a sharp appreciation in the euro. A raft of November manufacturing and services PMI are also in store. On Friday, October German factory order numbers are issued; consensus expectations are for a 0.8% monthly fall, compared with a 3.3% rise previously.
In the UK, Thursday’s Monetary Policy Committee policy is also unlikely to make any changes to policy given November’s no change decision despite improving UK economic conditions. On Thursday the Chancellor delivers his Autumn Statement on the economy. Finally, the health of China’s services sector is revealed by the November HSBC/Markit Services PMI for China on Wednesday.