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Key Focus This Week: U.S. ISM PMI & Employment Situation
Last week, as the “Trump trade” momentum faded, U.S. Treasury yields and the dollar index ended their eight-week streak of gains. The return of capital flows bolstered U.S. equities, pushing the S&P 500 to a new record high, closing at 6,032.39 points. In the bond market, the 10-year U.S. Treasury yield fell sharply by 22 basis points to around 4.18%, while the dollar index retreated to approximately 105.7, reflecting the weakening of Treasury yields.
Key Economic Data Review for Last Week
FOMC Meeting Minutes: The Federal Reserve’s November meeting minutes revealed that officials remain confident in inflation returning to the 2% target and believe the downside risks to the labor market have diminished. Some officials indicated that, assuming the economy and inflation align with expectations and given the uncertainty around the neutral rate, a gradual approach to rate cuts would be appropriate.
U.S. PCE: The Personal Consumption Expenditures (PCE) price index rose by 2.3% year-on-year (previous: 2.1%) and 0.2% month-on-month (unchanged from the prior month). Core PCE increased by 2.8% year-on-year (previous: 2.7%) and 0.3% month-on-month (unchanged). This uptick largely reflected persistent service price stickiness (up 0.4% month-on-month) and the impact of a low base effect. The results were broadly in line with market expectations, as the Fed had previously forecasted a year-end inflation rebound, followed by a decline in early 2024.
China PMI: China’s manufacturing PMI edged up slightly to 50.3 in November (previous: 50.2). Sub-indices showed production at 52.4 (previous: 52.0), new orders at 50.8 (previous: 50.2), supplier delivery time at 50.2 (previous: 49.6), and new export orders at 48.1 (previous: 47.3). These gains reflected the impact of the “trade-in” policy, Singles’ Day promotions, and export acceleration driven by the Trump election effect.
Non-manufacturing PMI dipped slightly to 50.0 (previous: 50.2). Key sub-indices such as new orders, input prices, and employment also weakened. By sector, the service activity index remained in expansion at 50.1 (unchanged), while the construction activity index declined further into contraction territory at 49.7 (previous: 50.4), reflecting the seasonal slowdown in the construction sector during winter.
Key Economic Data for This Week
U.S. ISM PMI (12/2) & NMI (12/4) : With the Boeing strike resolved and election uncertainties dissipating, coupled with the tailwinds from Q4’s consumer-driven holiday season, the manufacturing PMI for November is expected to improve slightly to 47.7 (previous: 46.5). Meanwhile, the services PMI is anticipated to remain steady at 55.5 (previous: 56.0), supported by robust consumer activity during the holiday season.
U.S. Employment Data (12/6): October’s nonfarm payrolls were unexpectedly weak due to short-term factors such as hurricanes and the Boeing strike. As these effects subside, nonfarm payroll growth is expected to recover, with November’s figure forecasted at 202,000 (previous: 12,000). The unemployment rate is projected to rise slightly to 4.2% (previous: 4.1%).
