As the holiday season approaches, global financial markets face a pivotal week with high-stakes decisions from major central banks and crucial data releases on eurozone business activity. The Federal Reserve (Fed), Bank of England (BoE), and Bank of Japan (BoJ) are all set to announce their interest rate policies. Meanwhile, in Europe, investors are keenly awaiting flash Purchasing Managers’ Indices (PMIs) to gauge the economic health of key eurozone economies.
Europe: Eurozone PMIs in Focus
S&P Global will publish flash December PMIs for France and Germany, offering a window into the region's manufacturing and services sectors.
Germany:Manufacturing activity in Germany has been in persistent contraction, with November’s PMI revised to 43.0, matching October's figure. Analysts expect a modest improvement to 43.1 in December, but the sector remains under significant pressure from political and economic uncertainties. The services PMI, revised to 49.3 in November, also indicates contraction, though forecasts suggest a slight uptick to 49.5.
France:France's manufacturing PMI saw its 22nd consecutive contraction in November, revised to 43.1, the steepest slowdown since January. On the services front, the PMI was revised higher to 46.9 but still marked the sharpest contraction in nearly a year. Political uncertainties, particularly around budget negotiations, continue to weigh on sentiment, with December figures expected to hover near current levels.
Across the eurozone, these data points will provide vital insights for investors assessing the region’s growth trajectory and the European Central Bank’s (ECB) next steps.
United Kingdom: Balancing Inflation and Policy
In the UK, manufacturing PMI fell to 48.0 in November, reflecting a deeper contraction compared to eurozone peers. However, services PMI remains in expansion territory, though at its slowest growth rate in over a year. December's PMIs are expected to show slight improvements as businesses adapt to global demand challenges.
The BoE is anticipated to hold its interest rate steady at 4.75% following rate cuts earlier this year. However, inflationary pressures persist, with October's CPI rising to 2.3% from 1.7% in September. November’s CPI is forecast to climb further to 2.6%. The UK’s tight labour market and higher government spending add complexity to the BoE’s cautious approach to easing.
United States: Fed to Maintain Gradual Easing
The Federal Reserve is widely expected to lower its benchmark interest rate by 25 basis points, marking its third cut of the year. Recent data shows inflation ticking up for a second consecutive month in November, while the labour market remains resilient, albeit easing.
Manufacturing PMI in the US saw an upward revision to 49.7 in November, the softest contraction since July, while services PMI posted its largest growth since March 2022. Retail sales data and final Q3 GDP figures are also under the spotlight, with consumer spending likely contributing to inflationary pressures. Economists project the PCE inflation index to rise 0.2% month-on-month in November.
Asia-Pacific: Spotlight on the BoJ and China
The Bank of Japan’s policy meeting will be closely watched as markets weigh the possibility of another rate hike. Following rate increases earlier this year, the BoJ remains open to further tightening if wage growth and inflation align with its forecasts. Currently, markets are split on whether another hike is imminent.
In China, the People’s Bank of China (PBoC) is expected to maintain its 1-year and 5-year Loan Prime Rates (LPR) after larger-than-anticipated cuts in October. With the Chinese economy still recovering, the PBoC's decisions will be critical for regional market sentiment.
This week is set to define market movements as central bank decisions and economic data releases provide a clearer picture of global growth prospects and monetary policy trends. Investors across Europe, the US, and Asia will closely monitor these developments to adjust their strategies in anticipation of 2024’s challenges.
Source: Euronews
Commentaires