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Daily Markets: Global PMI Reports Paint Today’s Picture

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Today’s Big Picture

Asia-Pacific equity markets ended today’s session mixed. South Korea’s KOSPI fell 0.62% while India’s SENSEX and Taiwan’s TAIEX were both essentially flat, returning 0.05% and 0.07%, respectively. Japan’s Nikkei rose 0.15%, and Australia’s ASX All Ordinaries advanced 0.32% while China’s Shanghai Composite gained 1.76% on news of planned relaxation of current anti-covid measures. Hong Kong’s Hang Seng set the pace, jumping 4.51% on a broad rally with Technology Services, Consumer Services, and Non-Energy Minerals all returning 8% or better on the day

By mid-day trading, major European equity indices are trading down, and U.S. futures point to a lower open later this morning. Investors will be digging through a sea of November Service sector PMI data today, looking to determine not only the true pace of the global economy but the prospects for further downward revisions to earnings expectations, particularly for S&P 500 component companies. We expect Fed watchers to focus on input and output cost comments contained in those reports as they prepare additional inflation data coming this week, including the November Producer Price Index report.

On a positive note, it appears China is set to further announce a nationwide reduction in testing requirements pointing to a potential rebound in economic activity. Potentially offsetting that are the G-7 price cap on Russian oil and the start of the Eurozone’s ban on seaborne Russian oil as well as any geopolitical fallout that may emerge.

Data Download

International Economy

The Caixin China General Services PMI fell to 46.7 in November from 48.4 in October, pointing to the 3rd straight month of drop. This was the steepest contraction in the service sector since May, amid anti-COVID containment measures that weighed on demand, leading November new orders to fall the most in six months.

The au Jibun Bank Japan Services Business Activity Index posted at 50.3 in November, down from 53.2 in October.

The S&P Global Eurozone Services PMI came in at 48.5 in November, little changed from the Flash figure of 48.6 and October’s final reading. Incoming new business contracted for the fifth month running, with the pace of decline unchanged from October’s 20-month high. Input costs and output charges both increased sharply, although rates of inflation were at their weakest in three months.

Eurozone retail sales dropped by 1.8% MoM in October, slightly missing the market expectations of a 1.7% drop. Rising borrowing costs, high inflation, and a deepening energy crisis hit consumer demand. On a YoY basis, retail sales fell 2.7% in October, the fifth consecutive month of unchanged or lower trade.

The S&P Global/CIPS UK Services PMI was confirmed at 48.8 in November of 2022, the same as in the preliminary estimate and matching October’s reading, which was the lowest since January 2021.

OPEC+ decided to stick to its existing policy of reducing oil production by 2 million barrels per day, or about 2% of world demand, from November until the end of 2023.

Today, the European Union is expected to ban all imports of Russian seaborne crude, while G-7 member nations impose a price cap on the oil Russia sells to countries around the world. G7 nations and Australia agreed to a $60 per barrel price level, with an adjustment mechanism that keeps the cap at least 5% below the market rate and allows for revisions every two months.

Domestic Economy

Today sees market data providers S&P Global (SPGI) and ISM releasing their final updates to November Services PMI with Markit expecting a rise to 47.3 from the previously released 46.1 and ISM calling for a slight decline to 53.0 from the previously reported 54.4. Final Composite PMI is also expected to be released with consensus estimates looking at 47.4, roughly a point higher than the most recent update of 46.3.

10:00 AM ET will see the release of MoM changes in October Factory Orders which are expected to tick up to 0.70% from the previously announced 0.30% growth rate.

Markets

Markets continued to settle as economic data and Fed Governor speeches sink in for investors. The Russell 2000 gained 0.59% and the Dow closed a mere 0.10% higher while the S&P 500 declined 0.12% and the Nasdaq Composite fell 0.18% to close out the week. Renewable energy company Enphase Energy (ENPH) had a strong close to the week, up over 7% on news that a number of Chinese competitors had been found to be circumventing U.S. trade tariffs as well as earlier news of the launch of products in Europe, a first for the company.

Here’s how the major market indicators stack up year-to-date:

  • Dow Jones Industrial Average: -5.25%
  • S&P 500: -15.57%
  • Nasdaq Composite: -26.74%
  • Russell 2000: -15.70%
  • Bitcoin (BTC-USD): -63.19%
  • Ether (ETH-USD): -64.97%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Science Applications (SAIC) will be among the few companies reporting their latest quarterly results.

Key Apple (AAPL) manufacturing partner Hon Hai Precision (HNHAF) reported November revenue of NT$551.09B, down 29.04% MoM and 11.36% YoY.

Bloomberg reports Tesla (TSLA) is looking to reduce production at its Shanghai factory by ~20%.

Dine Brands Global (DIN) agreed to acquire fast-casual restaurant Fuzzy’s Taco Shop from Experiential Brands for $80 million in cash.

Over the weekend, Johnson & Johnson (JNJ) confirmed it does not intend to bid for Horizon Therapeutics (HZNP), leaving Amgen (AMGN) and Sanofi (SNY) as potential contenders

IPOs

As we head into the holiday season the near-term IPO calendar is fairly light so there are no significant IPOs slated to price this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Gitlab (GTLB) and Sumo Logic (SUMO) are expected to report quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.

On the Horizon



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