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Key Focus This Week: U.S. & China PMI
Last week, the U.S. stock market rebounded as investors digested the Federal Reserve’s adjustments to its rate and inflation forecasts. The S&P 500 index closed at 5,970.84, nearing the psychological 6,000 level. In the bond market, the yield on the 10-year U.S. Treasury extended its upward momentum, rising to around 4.63%. Meanwhile, the U.S. Dollar Index fluctuated before settling near 108.
Key Economic Data for Last Week
U.S. Consumer Confidence Index: The U.S. Consumer Confidence Index for December, released by the Conference Board, dropped to 104.7 (prior: 112.8), driven by a sharp decline in the Expectations Index, which fell to 81.1 (prior: 93.7). The report noted that while consumers showed optimism about the current and future labor market, their outlook for business conditions and income growth deteriorated significantly, reflecting concerns over potential increases in living costs due to former President Trump’s proposed tariff policies.
China Industrial Profits: China’s industrial profits for November declined by 7.3% year-on-year, narrowing by 2.7 percentage points compared to the previous month. Cumulative year-to-date profits decreased by 4.7% (prior: -4.3%), marking the fourth consecutive month of decline.
At the sectoral level, the contraction in specialized equipment manufacturing and electrical machinery and equipment manufacturing moderated, with cumulative year-to-date growth narrowing to -0.9% (prior: -5.2%) and -3.1% (prior: -5.1%), respectively, reflecting the ongoing positive effects of recently implemented policies.
However, industries like automotive manufacturing and computer, communications, and electronic equipment saw a slowdown, with cumulative profit growth at -7.3% (prior: -3.2%) and 2.9% (prior: 8.4%), respectively. Other sectors, including food, chemicals, and textiles, also reported weaker growth, highlighting persistent domestic demand weakness.
Japan Tokyo CPI: Tokyo’s Consumer Price Index (CPI) for December rose 3.0% year-on-year (prior: 2.5%), the largest increase this year. The rise was driven by the gradual withdrawal of energy subsidies and a sharp increase in fresh food prices. Core CPI, which excludes fresh food, rose 2.4% year-on-year (prior: 2.2%), while the double-core CPI, excluding both fresh food and energy, rose 1.8% (prior: 1.9%).
During the December Bank of Japan (BoJ) meeting, Governor Kazuo Ueda emphasized that the timing of the next rate hike would depend on domestic wage growth, pushing market expectations for the next hike to after the spring wage negotiations in March. However, Ueda stated on December 25 that maintaining low interest rates amid economic improvement could lead to “excessive” monetary easing, hinting at a potential rate hike as early as January.
Key Economic Data for This Week
China PMI (12/31): China’s PMI is expected to remain at last month’s level of 50.3, supported by government policies encouraging equipment upgrades and trade-in programs for consumer goods. Additionally, a rush in exports due to uncertainty over future U.S. tariff policies may provide short-term support for manufacturing production.
U.S. ISM Manufacturing PMI (1/3): The traditional consumption surge during the fourth-quarter holiday season, coupled with renewed car-buying demand driven by discounts and tariff uncertainties, is expected to provide some support to U.S. manufacturing activity. Markets anticipate December’s ISM Manufacturing PMI to remain near the previous month’s level of 48.3 (prior: 48.4).
