PMIs indicate ongoing Asian outperformance and European underperformance, although the US is also likely to fall behind in coming months as Covid-19 disruption accelerates
- The JP Morgan all-industry PMI index declined just -0.2pts in November to 53.1, despite a sharp pickup in COVID cases in the US and Europe. The service sector was the driver of the decline over the month, with the global index falling -0.7pts to 52.2, whilst manufacturing increased from 54.3 to 55.2. On a regional basis, the report highlighted further optimism in Asia, resilient gains in both services and manufacturing in the US and a slowdown in momentum in Europe (Euro area services -5.6pts, UK services -3.8pts).
- The China Caixin Services PMI climbed higher in November +1.0 to 57.8pts (consensus: 56.4). The new business activity subcomponent recorded the highest reading in over 10 years at 58.7, driven by new export business, with the employment subindex also touching a new local high. The Caixin Manufacturing PMI rose 1.3pts to 54.9 in November (consensus: 53.5), with strength in all subcomponents.
- The official NBS PMI composite from China rose from 51.4 to 52.1pts in November. The non-manufacturing PMI rose from 56.2 to 56.4 in November and the manufacturing index rose from 51.4 to 52.1. Subcomponents showed a similar growth trend, but the employment sub-index increased less from 49.3 to 49.5.
- The Euro area composite PMI reading was revised upwards by 0.2pts from the flash estimate to a contractionary reading of 45.3 (October: 50.0). The final readings across the largest economies were: Germany 51.7, France 40.6, Spain 41.7, Italy 42.7 and UK 49.0.
- The US ISM non-manufacturing index declined to (a still healthy) 55.9 in November (October: 56.6, consensus: 55.8). The US manufacturing index declined from 59.3 to 57.5 in November, more than was expected (consensus: 58.0).
- US non-farm payrolls missed expectations by a wide margin on Friday, adding just 245,000 jobs (consensus: 469,000, October: 610,000). This is the slowest pace of new jobs added since May, after the record 20.8m losses in April. However, the unemployment rate in the US fell from 6.9% to 6.7% as the participation rate edged lower from 61.7% to 61.5%.
Market still firmly risk-on
- Equities posted another week of gains, the Value factor continued to perform strongly, with weak performance from government bonds and the US dollar. Latam currencies were the prime beneficiary of the dollar weakness.
- US 10-year yields are close to breaching 1% for the first time since the March risk-off rally (albeit having reached and rejected the level twice since – in early June and early November). Bunds and gilts significantly outperformed Treasuries over the week although both were modestly higher in yield. Inflation breakevens posted healthy gains across the globe.