Switzerland’s economy showed its relative strength, rebounding in the third quarter despite its major, neighbouring trading partners falling into contraction during the same period. US and European stocks were up to end the week, while Asian equities were mixed on Monday. Gold exploded to a new all-time and bitcoin reached its highest level of the year so far.
Switzerland’s economy rebounded in the third quarter, growing 0.3%. Revised figures showed that Swiss gross domestic product contracted by 0.1% in the second quarter rather than remaining flat as initially reported. A strong service sector propped up the third-quarter figure. The growth comes despite a challenging economic environment, particularly in Switzerland’s neigbouring countries, which are some of its biggest trading partners. Both Germany and France, the euro area’s two largest economies, fell into economic contraction in the third quarter. Switzerland’s SMI finished Friday up 0.3% and the Euro Stoxx 50 gained 0.8%.
Switzerland’s services sector is expected to remain strong with the Services Purchasing Managers’ Index (PMI) for November coming in at 53.6 points, up 1.4 points when compared to the previous month and its fourth month in a row above the 50 level, which signals expansion. The Swiss industry also improved but from low levels. Manufacturing PMI increased 1.5 points to 42.1 in November. While manufacturing is at a weak level, the economy as a whole looks sounder than that of its neighbouring EU countries and inflation was a moderate 1.7% in October, below the Swiss National Bank’s (SNB) 2% target for several months in a row. The central bank is expected to keep interest rates unchanged at its next monetary policy meeting later this month.
The slump in euro area manufacturing eased a bit in November. The Manufacturing Purchasing Managers’ Index (PMI) for the eurozone increased to 44.2 in November from 43.1 in October. Manufacturing PMI in the bloc largest economy, Germany, rose to 42.6 points in November from 40.8 in the previous month, marking the 17th month below the 50 mark that signals contraction. Germany’s DAX gained 1.1% on Friday.
In New York, stock indices moved higher to end the week after a speech by Federal Reserve (Fed) Chair Jerome Powell that largely repeated a message familiar to market participants at this point: The Fed will continue to tighten policy if needed to contain inflation. The Institute for Supply Management’s Manufacturing PMI for the US didn’t provide much of a reason for markets to move, remaining unchanged in November at 46.7 per cent, the data release from Friday showed. The Dow Jones Industrial finished Friday’s session up 0.8% and the S&P 500 gained 0.6%. The Nasdaq-100 closed 0.3% higher.
In the Asia-Pacific region, stock markets were mixed to start the new week. Japan’s Nikkei 225 finished 0.7% lower as traders await inflation data due on Tuesday from Tokyo, which is considered to a leading indicator for national inflation. In South Korea, the Kospi was up 0.4%. Inflation figures are also due from that country on Tuesday. Australia’s S&P/ASX 200 gained 0.7%. Traders expect the Reserve Bank of Australia to keep interest rates unchanged at tomorrow’s final policy meeting of the year. Hong Kong's Hang Seng Index was down 0.8%, while the Shanghai Composite lost 0.2%.
In commodities and alternative assets, oil failed to sustain gains from the previous week and was trading at the lowest levels since July with Brent around USD 78 per barrel and West Texas Intermediate below USD 74 per barrel. Gold surged well beyond USD 2100 per ounce in the early morning hours of Monday but was stable around USD 2084 later in the morning. There was no clear catalyst for the move, but gold has been moving higher for the last couple months as investors have slowly concluded that the world’s major central banks have stopped raising rates. That narrative has also favoured bitcoin, which exploded through the USD 40'000 mark and was trading around USD 41'500 Monday morning. Traders are expecting a bitcoin spot exchange traded fund to be approved in the US soon.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: German trade balance (08:00 CET), Swiss Consumer Price Index (08:30), European Central Bank President Christine Lagarde speaks (15:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.