Businesses in Germany were more optimistic this month than last despite the economy slipping into recession in the third quarter. While equity markets in Europe and the US ended last week with mostly small gains, Asia stocks started off Monday’s session in the red. Gold was trading up at around USD 2,010 per ounce and Brent crude oil futures were about 0.8% lower on Monday ahead of a meeting of the OPEC+ group of oil-exporting nations.
German business confidence improved in November, according to a survey result released on Friday. Germany’s ifo Business Climate Index came in at 87.3 points, up from 86.9 points in October. The third month of improvement in a row comes from a low level and against a backdrop of weak economic data out of Europe’s largest economy. Germany’s economy contracted in the third quarter after two quarters of stagnation, data released at the end of last week showed. Gross domestic product (GDP) shrank by 0.1% when compared with the previous quarter. With many economists forecasting another quarter of shrinking GDP to finish 2023, Germany may be headed towards a second recession this year. A recession is generally considered to be two consecutive quarters of contracting GDP. Germany’s DAX and the Euro Stoxx 50 both gained 0.2% on Friday.
In New York, stock indices didn’t change much during Black Friday’s shortened trading session. The Dow Jones Industrial ended the day 0.3% higher for a gain of 1.3% during the full week. The S&P 500 finished up just 0.1% on Friday. The Nasdaq-100 lost 0.1% but was still up 0.9% for the week.
In individual stocks, Nvidia’s shares closed down 1.9% on Friday after media reports that the chipmaker is delaying the shipment of chips to China that were designed to be compliant with US export rules. The US government has issued a series of export restrictions for AI-related chips to China as part of an ongoing economic sanctions battle between the world’s two largest economies.
In US macroeconomic data, the Composite Purchasing Managers’ Index (PMI) was stable this month at 50.7 with stronger services offsetting a contracting manufacturing sector. Traders will spend the start of the week digesting any information about consumers’ behaviour over the long weekend in the US, which is the most important shopping period of the year. Last week, the Michigan Consumer Sentiment Index fell for the fourth month in a row in November to 61.3, down 2.5 points from October. The US consumer has largely been the source of US economic success this year with the world’s largest economy regularly performing better than economists’ expectations. A slowdown in holiday sales could elicit concern among traders that this important driver of the US economy is stuttering.
In the Asia-Pacific region, stock markets got off to a bad start for the week. The Nikkei 225 closed down 0.6% after Japan’s Services Producer Price Index (PPI) increased by 2.3% in October, accelerating from 2.0% in September. Japan is struggling to achieve sustained increases in inflation and the Bank of Japan has made stable inflation - particularly supported by solid demand - a condition for normalizing its ultra-loose monetary policy. In China, industrial profit growth slowed for a third consecutive month in October. The Shanghai Composite was trading 0.2% lower on Monday. Hong Kong's Hang Seng Index also lost 0.2%, while stocks of property developers were the largest losers. The sector came under pressure again after media reports emerged over the weekend that financial group Zhongzhi Enterprise, which is heavily invested in the property sector, was under investigation. In South Korea, the Kospi ended the day roughly flat and Australia’s S&P/ASX 200 lost 0.8%.
Total employment measured by the number of jobs filled in the Swiss economy was up by 1.9% in the third quarter when compared to the previous quarter. The gain was 0.1% on a seasonally adjusted basis. There was a total of 10,000 positions less available in the Swiss economy than during the previous quarter. Switzerland’s SMI was up 0.3% on Friday.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: US building permits (14:00 CET), European Central Bank President Christine Lagarde speaks (15:00), US new residential sales (16:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.