The growth rate of the US economy in the third quarter was revised upward on Wednesday to 5.2% from a previous figure of 4.9% when compared with the same quarter a year earlier. Wall Street initially traded strong following the data release before losing most of its gains and closing mixed. Stocks in Asia went in the other direction on Thursday, rallying late in the session. Treasury yields continued to fall across the curve with the benchmark ten-year yield around 4.28%.
The strong economic growth in the third quarter was the latest US macroeconomic data to surprise to the upside after concerns about a recession in 2023 dissipated. The data wasn’t enough to keep markets in positive territory, however, as US stocks lost most of their gains towards the end of Wednesday’s session. The Dow Jones Industrial closed the day essentially flat while the S&P 500 and Nasdaq-100 both lost around 0.1%. Despite the weak finish to the session, US stocks are performing well this year, with the S&P up nearly 20% year to date, fuelled by hopes that the Federal Reserve (Fed) has reached peak rates. US personal consumption expenditures, due Thursday afternoon, could provide some insights into the Fed’s next move in December.
In the Asia-Pacific region, stock markets made clear gains as investors digested a series of macroeconomic releases. The Manufacturing Purchasing Managers’ Index (PMI) for China fell for a second month in a row to 49.4 in November from 49.5 the previous month. That value is below the 50-mark, which separates expansion from contraction. Non-manufacturing PMI remained above that level, at 50.2 in November but was down from 50.6 in October, falling to a low for the year. The weak business activity data come despite efforts by the Chinese government to prop up the economy this year following a disappointing reopening from Covid lockdowns. Following the release of the weak PMI data, investors were speculating that more economic stimulus could follow and Chinese stocks managed to finish the day in positive territory. The Shanghai Composite gained 0.3% and Hong Kong's Hang Seng Index was trading 0.4% higher.
Beyond China in the Asia-Pacific region, South Korea’s Kospi finished Thursday’s session 0.6% higher after the country’s central bank kept rates unchanged for the seventh consecutive time. In Tokyo, the Nikkei 225 finished Thursday’s trading session up 0.4% despite sluggish retail sales data, which grew at the slowest pace so far this year, up 4.5% in October. In Australia, the S&P/ASX 200 gained 0.7%.
German inflation eased in November, coming in at 3.2% when compared to the same month of the previous year, which is the lowest level since June 2021. The Consumer Price Index (CPI) excluding food and energy prices - known as Core CPI - increased 3.8%. The year-on-year data has been falling recently particularly due to retreating energy prices when compared to last year. Energy and other commodity prices exploded during 2022 due to the outbreak of the war in Ukraine.
In individual company news, European property and retail firm Signa Holding declared insolvency on Wednesday. Investors are concerned that the fall of a major player in the sector could weigh on already weak real estate prices if the company is forced to sell properties. It remains to see what the company’s resturcturing for means for the financial sector as media outlets reported that banks across Europe and beyond have exposure to the firm.
In geopolitics, Israel and Hamas agreed to extend ceasefire so that negotiators have time to continue hammering out hostage exchange deals.
Corporate news in focus: Dell Q3 figures, Remy Cointreau half-year figures and ABB Capital Markets Day.
Economic data in focus: German retail sales (08:00 CET), Swiss retail sales (08:30), Switzerland’s KOF Economic Barometer (09:00), German unemployment rate (09:55), OPEC press conference (11:00), euro area Consumer Price Index (11:00), euro area unemployment rate (11:00), US personal consumption expenditures (14:30), US weekly initial jobless claims (14:30), European Central Bank President Christine Lagarde speaks (14:30), US existing home sales (16:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.