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EUROZONE DATA: Oct Manuf PMI: Weak International Demand Cited
The Eurozone October final manufacturing PMI saw a small upward revision to 46.0 (vs 45.9 flash) following a four tenth upward revision in Germany to 43.0. This was the 28th consecutive month in contractionary territory. The broad strokes of the report were similar to last week's flash readings, though we note the following excerpts on international demand across the four major Eurozone economies, where Spain stands out as a positive outlier.
Germany: "The latest decrease in new orders was notably slower than that recorded the month before. This partly reflected international sales, which posted the smallest decline for five months in October".
- "Still, the respective rates of contraction remained sharp by historical standards, amid reports from panellists of headwinds to demand from economic and political uncertainty, high interest rates and troubles in the automotive sector".
France: "A considerable drag on new business wins came from abroad during October, latest HCOB data revealed, with new export orders decreasing at a considerably faster pace than in the previous month".
- "The latest reduction in international sales was among the steepest in the survey history. Geopolitical tensions were cited as a factor, in addition to global economic fragility".
Italy: "Manufacturers in Italy signalled a sharper decrease in new orders in October. The downturn was in part caused by a rapid and accelerated drop in export sales".
- "Some panellists cited reduced inflows of new business from the US, the Middle East and Europe in particular. Others blamed weakness on the international autos market"
Spain: "Underpinning the improvement in the PMI were concurrent uplifts in both production and new orders. Firms tended to attribute higher orders simply to an improvement in market demand, and this fuelled the best overall increase in new orders since May".
- "This improvement in market conditions was broad-based, with new export business rising at its best rate in nearly three years".
FOREX: USD Weakness Lacks Conviction, EUR/GBP Bounce in Focus
- Greenback weakness so far Monday has resulted in a new multiweek low of 103.630 for the USD Index, however conviction remains light and price action somewhat muted across G10.
- EUR/GBP made a notable break higher last week, with the cross breaking 0.8434 - a potential reversal point and another indication of the strength of longer-term range-defining support at ~0.8300.
- Last week's strength will be tested by rates markets in the very near-term - as conviction for persistent sequential ECB cuts runs against a more contained BoE easing cycle in light of last week's Budget. But further progress in the cross exposes 0.8464 - the next major resistance.
- With final PMI numbers out of the way, there are no further key releases set for Monday - comments from Nagel and Holzmann are unlikely to move the needle given the proximity to this week's US election results and the respective Fed/BoE decisions later in the week.
ECB VIEW: UBS Now Look For Sequential Cuts To 2.00%
UBS now have changed their ECB call “towards somewhat faster rate cuts:”
- They now expect “the ECB to cut rates by 25bps at every meeting until reaching the neutral rate of 2.00% (Dec., Jan., March, April, June).”
- Their central scenario “remains that labour markets will stay reasonably resilient, wage growth decelerates only gradually, and GDP growth stays subdued, but does not collapse. Hence, there would be no need for the ECB to cut in increments of 50bps or cut rates well below neutral.”
