The downward trend in German consumer sentiment seems to have hit a bottom for the moment as forecasts for December ticked up a bit. The data is good news for Europe’s largest economy which has struggled this year and slipped back into economic contraction in the third quarter. Most European stocks were in the red on Tuesday while Germany’s DAX managed to finish with small gains. US stock indices also ended Tuesday’s session in positive territory while most Asian equity markets were down on Wednesday. Gold extended its gains, the US Dollar Index fell, and US Treasury yields were down across the curve.
The forecast for Germany’s GfK Consumer Climate improved slightly to minus 27.8 points from November’s minus 28.3 points. The rebound comes after three months of decline in a row. The survey shows German consumers’ willingness to buy improving slightly ahead of the holiday shopping season, but consumers generally remain uncertain about the future. The improved consumer data is a win for Germany after data released late last week showed the economy had fallen back into contraction in the third quarter after a short recession in late 2022 and early 2023. Germany’s DAX finished Tuesday’s session 0.2% higher while the Euro Stoxx 50 fell 0.2%.
In the US, consumer confidence was also picking up. The Conference Board Consumer Confidence Index increased in November to 102 from 99.1 in the previous month, beating expectations. At 77.8 points, the Expectations indicator was much higher than October’s 72.7 points but has remained below the 80-mark for three months in a row now - a level that has generally flagged a recession coming within a year in the past. Consumer behaviour in the US has remained stronger than anticipated by many economists this year. Consumer spending in the US is closely watched by economists as it accounts for a large portion of the US economy.
In New York, stocks made mild gains on Tuesday supported by the soft-landing narrative that sees the US economy avoiding a serious recession even as inflation falls and rates peak. The muted trading this week can largely be attributed to traders waiting for Thursday’s Personal Consumption Expenditure (PCE) data, which will show whether inflation really is coming down at a pace consistent with the Federal Reserve (Fed) ending its interest rate hiking cycle. The Dow Jones Industrial increased 0.2% and the S&P 500 gained 0.1% on Tuesday. The Nasdaq-100 closed up 0.3%.
Beyond stocks, yields on the benchmark ten-year US Treasury were trading around 4.26%, far below their peak of over 5% just some weeks ago. Gold was near USD 2,045 per ounce on Wednesday and appeared to be stable well above the psychologically important USD 2,000-level.
In the Asia-Pacific region, stock markets looked less rosy midweek than in the US the day before. Regional losses were led by Hong Kong's Hang Seng Index, which was trading down 2.4% on Wednesday. Hong Kong-listed delivery company Meituan’s shares dropped nearly 12% after the firm said fourth-quarter revenue could fall versus the previous quarter. A slowdown in consumer spending would add to China’s woes, which has already failed to meet market expectations after reopening its economy from strict Covid restrictions early this year. In mainland China, the Shanghai Composite was down 0.5%. In Tokyo, the Nikkei 225 finished Wednesday down 0.3% and South Korea’s Kospi lost 0.1%. In Australia, the S&P/ASX 200 bucked the trend, adding 0.3 %, after inflation decelerated to 4.8% in October, its lowest value in almost 2 years.
Corporate news in focus: Q3 figures from Aurelius and Footlocker.
Economic data in focus: Spanish Consumer Price Index (09:00 CET), German Consumer Price Index (14:00), US gross domestic product (14:30), Bank of England Governor Andrew Bailey speaks (16:05), weekly US EIA Petroleum Status Report (16:30), US Fed Beige Book (20:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.