Global Equity Markets, 21 November 2022
Global macroeconomic summary
US November PPI came in lower than expected at 0.2% m/m, as widely anticipated due to the downward CPI surprise from last week. Sharp drop in the pace of price increases will likely push the Federal Reserve to slow/stop rate hikes sooner than previously projected. However, Fed Governor Waller suggested on Monday that a single data release (i.e. recent CPI and PPI) does not guarantee Fed’s pivot. Nevertheless, markets’ overall interpretation of Fed’s recent commentary is slightly dovish.
Stronger recession fears serve as another argument for Fed to pivot, as the US manufacturing index dropped contrary to expected improvement. The Philadelphia Fed Manufacturing Index declined sharply in November to reach the lowest level since 2011 (excluding the pandemic). Overall, the reading suggests slowed hiring as well as worsened 6-month forward outlook, with expected declines in overall activity and new orders. On a positive note, however, the US retails sales were higher than expected in October, growing 1.3% m/m vs 1.0% forecast.
The Euro area real GDP grew by 2.1% y/y in 3Q22, in line with expectations, a sizeable decline from previous quarter’s 4.3% figure. Moreover, inflation pace kept accelerating, with the headline reaching 10.6% y/y and the core – 5.0% y/y. Meanwhile, the economic sentiment index improved significantly more than expected in November, partly attributed to warm weather forecasts that imply less need for gas consumption throughout the winter.
Meanwhile, the UK faces trouble on both frontlines with inflation and unemployment both higher than expected. In November, headline inflation in the UK hit a new high of 11.1% while core increased to 6.5%. Number of the net new unemployed was 52,000, twice as large as the expected figure. Meanwhile, the 3Q22 GDP growth has almost halved and retail sales has been contracting for the 7th consecutive month.