Asian equity markets are mostly lower this morning after a big fall in the US equities yesterday. Reports suggest that markets were disappointed that this week’s central updates did not provide clearer signals of the possibility of a near-term ‘pivot’ in monetary policy. In China, government officials have hinted at the likelihood of more support for the ailing property market. December PMI data in Australia and New Zealand were consistent with a contraction in economic activity, while the Japanese index suggested that growth had stalled.
Data released this morning provided further timely information on UK consumer trends. The December reading for the GfK consumer confidence measure posted a third successive monthly improvement. However, at -42, it is still close to an all-time low reflecting consumers’ concerns both about their own finances and wider economy. Meanwhile, retail sales fell by 0.4% in volume terms in November, which suggests that the Christmas shopping season got off to a weak start.
The key data releases for the rest of the day are the December PMI measures for the Eurozone, UK, and the US. These are expected to indicate that both manufacturing and services are under pressure across all three economies.
In the UK, both the manufacturing and services headline readings have been below the 50 expansion/contraction level for the last two months and, in the case of manufacturing, for the last four. Further sub-50 readings are expected for December signalling that GDP probably declined again in Q4.
In the Eurozone, the manufacturing index has been below 50 for the past five months and services for the last four. Despite that GDP rose in Q3 but the expected outcome of the PMIs staying below 50 December would point to the risk of a GDP decline in Q4. In the US, both indicators were also below 50 in November and are forecast to stay there in December. However, other data releases suggest US GDP will have risen in Q4.
The November Eurozone CPI inflation is a second reading, which is not expected to be revised from the first estimate. That showed inflation down from October but still at a very elevated level. Finally, after a busy week of monetary policy updates from central banks there are now not many speeches scheduled from policymakers between now and the new year. However, today Federal Reserve policymaker Daly will offer some insights on the latest policy moves in the US.
Sterling fell against both the euro and the US dollar yesterday following the Bank of England’s latest monetary policy update. A split vote by policymakers on the need for another rate rise may have caused some confusion in markets about what will happen next to rates, while ECB signals of future policy was more hawkish than expected.
