Spain Stocks Start December with Advances
The IBEX 35 rose to 10,110 on Friday, hovering at its highest level since May 2018, as investors increasingly bet on monetary easing from central banks in 2024. Markets also digest fresh PMI data. Domestically, the HCOB Spain Manufacturing PMI contracted in November but came above estimates. On the corporate front, IT, metals, and tourism sectors recorded the largest gains, driven by Amadeus IT (1.8%), IAG (1.5%), ArcelorMittal (1.5%), Acerinox (1.5%), and Melia Hotels (1.4%). In contrast, Fluidra (-1.4%), Cellnex Tel (-0.9%), and Grifols (-0.7%) declined. Cellnex took a breather after last month's strong performance and signaled the continuation of its asset sales to reduce the debt. Meanwhile, in the banking sector, the ECB raised the capital buffer requirement for BBVA to 9.09% and for Caixabank to 8.58%. Also, Goldman Sachs began covering CaixaBank with neutral recommendation.
Cyprus GDP Growth Confirmed at 2.2% in Q3
The economy of Cyprus advanced by 2.2% year-on-year in the third quarter of 2023, the same as in the previous three-month period and matching preliminary estimates. Positive contributions to growth came from hotels & restaurants, construction, manufacturing, transport, storage & communication, wholesale & retail trade, repair of motor vehicles, arts, entertainment & recreation and other service activities. On a quarterly basis, the economy grew by 1.1% in Q3 of 2023, matching preliminary estimates, reversing a 0.4% contraction in the previous quarter.
Paris Stocks Edge Up 0.4%
The CAC 40 index gained by nearly 0.4% to trade around the 7,335 level on Friday, tracking its regional peers higher, fueled by increasing optimism regarding potential rate cuts from both the European Central Bank and the Federal Reserve. All eyes are now on comments from Fed Reserve Chair Jerome Powell later in the day for further clues on global policy outlook. Investors also digested the latest PMI survey results, indicating a slower contraction in Eurozone business activity for November. In France, the manufacturing PMI was also revised higher to point to a smaller factory decline. Among single stocks, Worldline (+2.6%) advanced the most, followed by Alstom (+1.9%) and Essilor (+1.6%). Conversely, Société Générale (-0.9%) posted the biggest loss after Morgan Stanley downgraded its stock recommendation to 'sell' from 'neutral' and lowered its price target to 22.25 euros from 31. On the week, the CAC 40 is on track to gain nearly 0.6%.
French 10Y Bond Yield Hits 3-Month Low
France’s 10-year OAT government bond yield continued its decline, slipping below the 3% mark and touching its lowest level since August 31st, as data from both Europe and the US indicating a sustained decrease in inflation amplified expectations of forthcoming rate cuts by major central banks. Investors are now anticipating more than 100 basis points in rate reductions next year from both the Federal Reserve and the European Central Bank. The most recent economic reports revealed that Eurozone inflation experienced a larger-than-anticipated decline in November, reaching 2.4%, marking its lowest point since July 2021. Furthermore, the core rate eased to 3.6%, the lowest recorded since April 2022 and falling below forecasts of 3.9%. In France alone, the inflation rate dropped to 3.4% in November, representing the lowest rate since January 2022.
MOEX Extends Downward Trend
The ruble-based MOEX Russia index traded lower at 3,155 on Friday, extending its declines for the third session, pressured by lower oil prices and the possibility of another rate hike from the central bank after strong weekly inflation reading and manufacturing PMI data supported hawkish rhetoric. Among sectors, telecommunications, IT, and construction took the largest hit. Telecommunications were penalized by a 7.4% plunge in Rostelecom shares, as the company cleared of its dividends. The other underperformers included QIWI (-2.7%), Seligdar (-2.4%), Segezha (-1.7%), and RusGidro (-1.6%). In contrast, modest wins came from Rosseti (1.1%) and EN+ Group (1.1%). Also, Unipro added 0.8% on the day of publishing its financial results for Q3.
Norway Factory Activity Contracts for 2nd Month
Norway's DNB Manufacturing PMI increased to 49.9 in November 2023, marking the second consecutive month of contraction but up from the previous month's figure of 47.9, mainly driven by higher production (50.7 vs 45.4 in October) and employment (53 vs 52.2). At the same time, new orders (46.1 vs 44.9) decreased at a softer pace. Meanwhile, delivery time shortened (47.1 vs 48.4) and inventories (43.1 vs 46.6) continued to decline, indicating a lower demand. On the price front, the index for prices of purchased goods increased to 57.2 (vs 56.1) in November, suggesting that prices are still rising but remain below the long-term average.
Greek Manufacturing Activity Expands for 10th Month
The S&P Global Greece Manufacturing PMI inched up to 50.9 in November 2023 from 50.8 in the previous month and pointing to the tenth consecutive period of growth. Production volumes expanded for the tenth consecutive months, supported by a substantial backlog of orders. Also, higher levels of output partly reflected efforts to diminish backlogs of work. However, new order intakes stalled due to muted demand and customer destocking, negatively impacting sales. Meanwhile, employment numbers rebounded as manufacturers resumed efforts to boost business capacity. Purchasing activity increased, although manufacturers continued to tighten their inventory. On the price front, overall input cost inflation slowed to a four-month low, linked to lower raw material prices and reduced transportation bills. Lastly, a positive outlook for future growth was signaled by a rise in business activity expectations to the highest since August.
Austrian Economy Contracts Slightly Less than Initially Thought
Austria's gross domestic product contracted by 0.5% in the three months leading up to September 2023, slightly better than the initial estimate of a 0.6% shrinkage and in comparison to a revised 1.1% decline in the preceding period. The economy fell back into recession, as household consumption tumbled by 1.2% (compared to -0.5% in Q2) and gross capital formation dropped by 2.2% (versus 5.4% in Q2), driven by declines in investment in dwellings (-2.3% versus -3.1%) and total machinery and equipment (-4% versus 0.7%). Finally, net external demand contributed positively to the GDP, with exports rising by 2.4% and imports increasing at a slower pace of 1.2%. On a yearly basis, the economy contracted by 1.8%, following a revised 1.4% decline in the previous three-month period.
UK November Manufacturing PMI Revised Higher
The S&P Global/CIPS UK Manufacturing PMI was revised upward to 47.2 in November 2023, surpassing the initial estimate of 46.7 and October's 44.8. This latest reading reached its peak since April, although it still indicated the 16th consecutive month of contraction in the manufacturing sector. Output continued its decline amidst reports of weakened domestic demand, reduced intake of new export business, and destocking activities observed both among manufacturers and their clients. Moreover, new orders experienced an eighth consecutive month of decline, with new export business dwindling for a 22nd straight month. Employment also sustained a downward trend, along with reduced activity in input buying. Concerning prices, input costs decreased while selling prices rose, reflecting efforts to restore margins. Lastly, business confidence showed a slight improvement in November.
Swiss Manufacturing Downturn Eases
The Swiss procure.ch and Credit Suisse Manufacturing PMI rose to 42.1 in November 2023, up from 40.6 in the previous month and aligning closely with market expectations of 42. The gauges for production (46.6 vs 40.4 in October) and orderbook (38.1 vs 35.2) increased. Meanwhile, employment continued to decline, reaching its lowest level since October 2020. Concurrently, purchasing volume decreased for the thirteenth consecutive month.
South Africa Factory Activity Shrinks for 10th Month: Absa
The seasonally adjusted Absa Purchasing Managers’ Index rose to 48.2 in November 2023 from 45.3 in October, but still marking the tenth consecutive month of contraction in South Africa's factory activity. The business activity and new sales orders indices both continued to indicate declining activity and demand, albeit at a slower rate than before. The business activity index increased by 5.7 points to 46, and new sales orders saw an even larger 6.9-point rise to 46.6 points. While these substantial improvements are positive indications of a recovery in underlying demand, there are some concerning aspects, such as the fact that higher activity did not filter through to the employment index, which remained largely unchanged at a low 41.1 index points. The expected business conditions index also declined further and is now at its weakest level since the COVID-19 lockdown in 2020. After a significant 12.2-point slump in October, the index lost a further 2.4 points to reach 41.
Italy 10Y Bond Yield Falls to 3-Month Low
The yield on the 10-year Italian BTP slipped further below the 4.2% threshold and reached its lowest point since late August, amid growing prospects of interest rate cuts at major central banks following the release of inflation prints that were cooler than expected from both the Eurozone and the US. The most recent economic reports unveiled a slowdown in the Eurozone's inflation rate to 2.4% last month, marking its lowest level since July 2021 and falling short of the market consensus of 2.7%. Simultaneously, the core inflation rate dipped to 3.6%, also trailing below expectations set at 3.9%. Specifically in Italy, the inflation rate took a sharp tumble to 0.8%, the lowest recorded since early 2021, significantly diverging from the ECB's 2% target. Still, ECB policymakers have endeavored to maintain a somewhat cautious stance in their narrative, aiming to temper excessive market enthusiasm.
Italian Shares Extend Gains as December Kicks Off
The FTSE MIB kicked off the December month on a strong note, adding about 0.5% to above the 29905 level, a new 15-year high, and extending a 7.2% surge for the November month, with investors betting major central banks and specially the Fed and the ECB will start cutting rates next year. On the corporate front, CNH Industrial was among the top performers (3.5%) after S&P Global raised its long-term rating for the company to 'BBB+' from 'BBB'. The banking sector was also in the green, namely Banca Monte dei Paschi di Siena (1.5%), Bper Banca (1.2%), and Intesa Sanpaolo (0.9%). Saipem (0.8%) and Eni (0.5%) also beneffited from the recent OPEC+ agreement. On the data front, final estimates showed the Italian GDP edged up 0.1%, better than a flat reading initially reported while the manufacturing PMI pointed to a bigger-than-expected factory downturn.
Italy GDP Revised Higher in Q3
The Italian GDP edged up by 0.1% from the previous quarter in the three months up to September 2023, coming slightly above the preliminary estimate of 0% and following the 0.4% contraction in the three months to June, final reading showed. The revision was linked to strong net foreign demand (1% vs -0.7%) and firm household consumption (0.4% vs 0%). Both fixed investment (0% vs -0.4%) and government spending (0% vs -0.2%) were unchanged. On the other hand, the fall in inventories contributed negatively to the GDP by 1.3%. On the production side, industry (0.3%) and services (0.1%) recorded timid increases, while the primary agricultural sector decreased by 1.2%. Yearly, the GDP went up by 0.1%, compared the previous estimate of 0% and after 0.3% expansion in the second quarter.
Nigeria Private Sector Contracts for 2nd Month
The Stanbic IBTC Bank Nigeria PMI fell to 48 in November 2023 from 49.1 in October, marking the second straight month of contraction. New business experienced a significant decline, the most pronounced since the cash crisis earlier this year, as both output and new orders dropped further. Activity decreased sharply for wholesale & retail companies, while agriculture was the only sector that posted an increase in output. On a positive note, employment grew for the seventh consecutive month. Purchasing activity was broadly unchanged, following a fall in October. On prices, purchase price inflation accelerated to a near two-year high on the back of exchange rate weakness and higher costs for fuel and materials. Also, firms increased their selling prices, with the rate of inflation easing slightly but remaining among the strongest on record. Lastly, business confidence fell to its weakest since July's record low, due to concerns about the impact of inflationary pressures on demand.
France Factory Activity Contracts for 10th Month
The S&P Global France Manufacturing PMI was revised slightly up to 42.9 in November 2023, compared to a preliminary estimate of 42.6 and edging up from 42.8 in the previous month. It was the tenth consecutive month of contraction and the steepest since May 2020, attributed to a remarkable weakness in demand. Although at a moderate pace, the new order continued to deteriorate, primarily due to weakening market conditions. Subsequently, output declined at the fastest rate since May 2020. This prompted trimmed workforce numbers, continued reductions in purchasing activity, and stocks of inputs registering their steepest fall since May 2020. On the price front, input price inflation was stabilized following the sixth straight month of decreases. Looking ahead, manufacturers were still strongly pessimistic for the next twelve months, as firms were reportedly preparing for lower orders from clients in the automotive and construction industries.
Eurozone Manufacturing PMI Revised Slightly Higher
The HCOB Eurozone Manufacturing PMI was revised slightly higher to 44.2 in November 2023, up from 43.1 in October and the highest since May. However, the most recent reading still indicated a seventeenth consecutive month of contraction in the bloc's manufacturing sector, with Austria leading the decline, closely followed by Germany and France. Output continued to decrease at a solid rate, albeit at a slower pace, along with both new orders and export sales. Backlogs of work declined in November, extending the ongoing period of depletion in outstanding business to a year-and-a-half, while the rate of job shedding was the fastest since August 2020. Additionally, suppliers’ delivery times shortened for the tenth consecutive month in November. Regarding prices, both input costs and output charges remained in deflationary territory. Lastly, business confidence improved, reaching a three-month high.
Germany Manufacturing PMI Revised Higher
The HCOB Germany Manufacturing PMI was revised higher to 42.6 in November 2023 from an initial estimate of 42.3, remaining the highest reading in six months. The PMI continues to point to a deep downturn in the manufacturing sector, although the decline is easing. Businesses reported the slowest declines in both output and new orders for six months, with trends in the consumer and investment goods groupings moving closer to stabilization. Also, expectations towards future activity improved although remaining pessimistic. Meanwhile, firms reported reducing buying levels in line with lower production and stock requirements. Also, falling demand across was once again reflected in downward pressure on prices as competition for new work fueled further discounting. The rate of decline in average factory gate charges was the weakest for five months. Factory employment however, declined faster.
Italy Factory Activity Shrinks Most since June
The HCOB Italy Manufacturing PMI fell to 44.4 in November 2023 from 44.9 in October, the lowest since June and at odds with market expectations of 45.3. Furthermore, the current sequence of contractions was extended to an eighth consecutive month, as weak demand conditions continued to burden the sector. Both output and new orders declined further, with the former decreasing at the fastest pace in three months. Firms signaled excess capacity since workers were laid off at the quickest rate since July 2020. At the same time, purchasing activity dropped to the greatest extent since November. On the prices front, deflationary trend proceeded. The degree of optimism regarding future remained well below the long-term average.
Miners Lift FTSE 100
The FTSE 100 was up nearly 0.7% to trade around the 7510 level on the first day of December, extending the 1.8% gain for the November month, led by industrial metal miners as a better-than-expected manufacturing PMI for China lifted metal prices. Anglo American (3.2%), Rio Tinto (2.6%), Antofagasta (2.2%) and Glencore (1.7%) were all higher. Also, AstraZeneca gained about 1.4% after the company said it would discontinue two trials for its drug Lokelma. On the other hand, Tesco lost 1.9% and was among the worst performers after JPMorgan moved the food retailer to ‘underweight’ from ‘neutral’.
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