Early Morning Call: China PMIs fall to 7-month lows amid zero-Covid policy
Manufacturing and services activities in China shrank further in November to seven-month lows.
Equity market overview
Equity markets were mixed overnight in the APAC region. The Nikkei fell 0,21, while ASX 200 rose 0.43%.
In Japan, industrial production declined by 2.6% in October, after a 1.7% drop a month earlier and compared with market forecasts of a 1.5% fall. This was the second straight month of decreases, mainly weighed down by production machinery, electronic parts, chemicals and medicine. On a yearly basis, industrial output rose by 3.7% in October, much lower than a 9.6% gain recorded in September.
As a consequence of China's zero-Covid policy, manufacturing and services activities shrank further in November to seven-month lows. NBS manufacturing PMI came in at 48 in November, after 49.2 in the previous month. Economists anticipated a PMI of 49.0.
Non-manufacturing PMI, which looks at service sector activity, fell to 46.7 from 48.7 the previous month, also the lowest reading in seven months.
Foxconn is offering bonuses to its workers to encourage them to return to work, as Apple could suffer a shortfall of iPhone's for the Christmas season. Analysts estimate that Apple could lose between $5 billion and $8bn in revenue.
In Europe, equity markets open higher.
At 10am watch out for Eurozone CPI. Economists expect a 10.4% increase in November year-on-year (YoY), a slight deceleration after the 10.6% recorded in October. The core inflation rate in expected to remain at 5%.
Yesterday, Germany's CPI rose by 10% in November YoY, missing expectations of a 10.4% increase, and below the 10.4% recorded in October.
In the US, investors await ADP employment change data. Economists anticipate the creation of 200,000 jobs in the US private sector. At 13.30 the final reading of third quarter (Q3) gross domestic product (GDP) is anticipated to show a 2.7% quarter-on-quarter expansion.
And at 3pm, we expect pending home sales. October consensus is of a 5% fall month-on-month (MoM), following a 10.2% drop in September.
Elsewhere on the equity market, Hewlett Packard Enterprise reported, after market close yesterday, quarterly adjusted earnings of 57 cents per share, in line with expectations. Revenue rose 7% to $7.9 billion, beating analysts’ expectations of $7.37bn.
The company forecast fiscal first quarter (Q1) sales of between $7.2bn and $7.6bn, while analysts forecast on average $7bn.
Among US earnings today is Salesforce. Analysts expect earnings of $1.22 per share on revenue of $7.83bn. Also watch for Snowflake. The market forecasts a loss of 63 cents per share of revenue of $539 million.
OPEC+ will hold its meeting on 4 December virtually rather than in person, which according to analysts signals little likelihood of a policy change.
The focus is now on the pending European Union deal on a price cap on Russian oil ahead of a 5 December deadline imposed by the bloc for a full embargo on purchases of Moscow's seaborne crude.
In October, OPEC+ agreed to cut output by two million barrels per day, equal to 2% of global supply, effective until Decemeber 2023.
Crude oil inventories fell by another 7.85 million barrels, according to the API, after falling by 4.2 million barrels the previous week. This is despite the release of 1.4 million barrels from the US Strategic Petroleum Reserves.
Gasoline stocks rose by 2.85 million barrels, while distillate inventories rose by four million barrels.
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