Eurozone PMIs Signal Shrinking Growth While Wages Jump
Week Ending November 22, 2024
Markets took a sharp turn this week as U.S. jobless claims fell to a 7-month low of 213,000, fueling optimism despite long-term Treasury yields dropping amid a flattening curve. In Europe, the unexpected contraction in Eurozone PMIs (48.1, ↓2pts) contrasted with Canada’s inflation rebound to 2% (↑0.4pts), keeping investors on edge. With regional contrasts sharpening and surprises like Canada’s retail surge, there’s a lot to unpack. Let’s dive into the numbers shaping the global outlook.
🔍 Takeaway
This week’s global markets painted a picture of contrasts. While the U.S. showed resilience with a strong labor market, Europe struggled with shrinking activity, and emerging markets continued their mixed trajectories. Investors are now watching closely for policy signals as inflation trends diverge across regions.
United States: Jobless claims hit a 7-month low at 213,000, reinforcing labor market strength and boosting equities. Meanwhile, the yield curve flattened as long-term Treasury yields dipped, signaling cautious optimism about future rate cuts. With the Fed eyeing disinflation trends, December’s meeting looms large for market direction.
International: Eurozone PMIs fell sharply to 48.1, reflecting a deeper contraction in business activity, particularly in manufacturing. At the same time, UK inflation unexpectedly rose to 2.3%, driven by energy prices, adding uncertainty to the Bank of England’s next move. These conflicting signals suggest uneven recovery prospects across Europe.
Emerging Markets: China’s PMI weakness (48.0) highlights ongoing economic challenges, while India surged ahead with services PMI at 59.2, marking the fastest growth in three months. This stark divergence underscores the varying pace of post-pandemic recovery in Asia and its implications for global growth.
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Source: Harald Lohre- LinkedIn
💼 Market Indicators
SPY Performance
Performance and Valuations by Region
Source: MSCI
Momentum performance by Style
Source: MSCI
S&P 500 Earnings Per Share
Source: Yardeni Research
🗺️ Around the World in Detail
United States 🇺🇸: A Tale of Resilience
213,000 jobless claims hit a 7-month low, reflecting continued labor market strength. Despite inflation concerns, this reinforces optimism about consumer spending.
Home sales rise for the first time since 2021, with mortgage rates stabilizing. This signals renewed housing demand, buoyed by a strong labor market.
Mixed Treasury yields: Long-term yields declined, while short-term yields rose, highlighting market anticipation of a cautious Fed in its December meeting.
International 🌐: Navigating Divergences
Euro Area 🇪🇺
Eurozone PMIs drop to 48.1, signaling contraction in both services and manufacturing. Germany and France lead the decline, reinforcing concerns of a regional slowdown.
Wages surge 5.4% YoY, the fastest since 2020, fueling inflationary risks despite weaker growth data. Markets anticipate ECB caution in upcoming policy moves.
Consumer confidence declines, falling to -13.7 in November, reflecting heightened economic uncertainty amid slowing business activity.
United Kingdom 🇬🇧
Inflation jumps to 2.3%, driven by energy costs. Core inflation at 3.3% further complicates BoE’s policy stance, reducing expectations for rate cuts in 2025.
Retail sales decline by 0.7% MoM, signaling weaker consumer confidence despite improving inflation trends earlier in the year.
Japan 🇯🇵
Inflation steady at 2.3%, remaining above BoJ's target. Governor Ueda signals potential rate hikes as early as December, supported by wage growth and weakening yen concerns.
Manufacturing PMI contracts to 49.0, its lowest since March, highlighting ongoing struggles in industrial output. This contrasts with modest growth in services PMI at 50.2.
Emerging Markets 🌏: Contrasts in Recovery
China 🇨🇳
Loan rates held steady at 3.6%, reflecting cautious stimulus ahead of Trump’s inauguration. Policymakers appear hesitant to front-run potential tariff impacts.
PMI contracts further, pointing to deepening manufacturing challenges, while housing sector woes persist despite recent stimulus measures.
India 🇮🇳
Services PMI jumps to 59.2, marking the fastest expansion in three months. Robust demand and rising employment signal a strong domestic recovery.
Manufacturing PMI remains resilient at 57.3, supported by higher output and international orders. Rising input costs, however, add inflationary pressures.
South Korea 🇰🇷
Producer inflation rises 1% YoY, steady from September but highlighting sector-specific divergences. Energy prices increased, while manufacturing product prices fell.
Monthly producer price index drops 0.1%, reflecting softening global demand for manufactured goods and ongoing export challenges.
Taiwan 🇹🇼:
Unemployment rate remains at 3.38%, while youth joblessness improves to 11.84%. Despite this, slowing exports and tech demand remain headwinds for economic mom
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