China flies, Europe stalls
- China’s economic recovery continued in Q3, as GDP added +4.9% over the quarter (August: +3.2%, consensus: +5.5%). The recovery has been fuelled by a state-backed industrial boom; fixed asset investment was up +0.8% year on year in September (+3.4% over the month), as Beijing made up for the decline in private investment over the last year.
- September retail sales reflected early signs of a pickup in consumer demand; +3.3% over the month (August: +0.5%, consensus: +1.6%). Whilst challenges remain in rebuilding business confidence, China is one of the few major economies that are forecast to generate positive GDP growth this year (IMF estimate: +1.9% in 2020).
- The eurozone PMI fell from 50.4 to 49.4 (consensus 49.2), the first print in contractionary (sub-50) territory since June. The manufacturing PMI rose from 53.7 to 54.4, but that was insufficient to offset the decline in services, from 48.0 to 46.2 (consensus 47.0), driven by intensifying COVID-19 worries and lockdown measures.
- The UK manufacturing PMI fell to 53.3 from 54.1 in October (consensus: 53.1), a 3-month low, and the services PMI fell to 52.3 from 56.1 (consensus: 53.9), a 4-month low. On the other hand, retail sales rose for a 5th consecutive month in September, up 4.7% year on year.
- UK inflation rose in line with expectations in September, from 0.2% to 0.5% year on year (consensus: 0.6%). Higher transport costs were one of the drivers of the increase (adding 0.2), as demand for used cars drove prices up, and restaurant prices also added 0.2 as the ‘Eat Out to Help Out’ scheme ended in August. This underpins comments from MPC Member Gertjan Vlieghe earlier in the week that 'the outlook for monetary policy is skewed towards adding further stimulus'. It is now just about the majority view that the BOE will announce more QE at its November 5th meeting.
Equities choppy, ebbing and flowing with US fiscal stimulus rumours
- Global equities moved sideways as expectations for a fiscal stimulus package in the US prior to the General Election waxed and waned.
- USD was weaker across the board as President Trump was unable to derive any boost from the final Presidential debate.
- Bonds and precious metals were little changed.