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China released its official PMIs for November and the numbers are a mixed bag as Beijing contemplates further stimulus for 2025:

• Manufacturing 50.3 vs 50.1 prior (50.2 was expected)
• Non-manufacturing 50.0 vs 50.2 prior
• Composite 50.8

This is the second straight month of gains for the manufacturing index.

On Friday, I highlighted fresh rumors about Chinese stimulus.

This article was written by Adam Button at www.forexlive.com.

• Canada Q3 GDP +1.0% vs +1.0% expected
• JPMorgan now sees the ECB cutting rates by 50 basis points in December
• US equity close: Big finish to a great month
• December forex seasonals: What’s hot, cold and gold in the month of December

Markets:

• JPY leads, USD lags
• US 10-year yields down 6 bps to 4.18%
• S&P 500 up 0.6%
• Gold up $13 to 2653
• WTI crude oil down $0.57 to $68.00

Markets were surprisingly lively for a de facto US holiday. Bids were strong in risk assets, which got help from a report saying US restrictions on chip exports may not be as strict. At the same time, softer eurozone inflation numbers might have fuelled a broader bid in bonds.

The Canadian GDP report also underscored a picture of a slowing global economy with rates that are needlessly high.

At the same time, it’s tough to square slowing growth in Europe and Canada with stronger currencies against the US dollar. Many are pointing to month end as the source of the Treasury bid and USD softness. Others point to the pick of Scott Bessent or fresh rumors about Chinese stimulus.

We will get answers about the turn of the calendar on Monday and I will be keeping a close eye on USD/JPY, as it appears to be embarking on the same kind of dramatic breakdown that we saw in the summer. That eventually spread to risk assets so some caution is warranted, though US economic data hasn’t shown many cracks yet.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.

I love it when the month ends on a Friday, it’s so tidy. And there was plenty of love to go around in markets in November following the US election.

Closing changes:

• S&P 500: +0.6%
• Nasdaq Comp: +0.8%
• DJIA: +0.4%
• Russell 2000: +0.65%
• Toronto TSX Comp: +0.3% (note that the TSX doesn’t close until 4 pm ET)

On the week:

• S&P 500: +1.1%
• Nasdaq Comp: +1.1%
• DJIA: +1.4%
• Russell 2000: +1.5% (finally breaks the 2021 weekly closing high but not the intraday high)
• Toronto TSX Comp: +0.7%

On the month:

• S&P 500: +5.8%
• Nasdaq Comp: +6.2%
• Russell 2000: +11.2%
• Toronto TSX Comp: +6.1%

The big winner for November? Bitcoin, which rose 38%.

As for the Russell 2000, virtually all the gains were made on election day and the day after. Eyes will be on it next week.

This article was written by Adam Button at www.forexlive.com.

The headline from today’s Canadian GDP report is that growth declined on a per-capita basis for the sixth consecutive quarter. In addition, monthly GDP data showed just 0.1% m/m growth in September and October.

CIBC writes:

“While growth in the Canadian economy slowed to a crawl in Q3, that was broadly anticipated and was mainly driven
by inventories and net trade. Domestic demand growth was much more solid and similar to the prior quarter. More
concerning for the Bank of Canada will be the monthly data that showed the quarter ending with a whimper rather
than the expected bang, leaving early tracking for Q4 well below the October MPR projection. Because of that, today’s
data are somewhat supportive of a 50bp cut at the next meeting, rather than a smaller 25bp reduction, although next
week’s employment figures will be just as important in making the final decision.”

RBC continues to see a 50 bps cut but will also be watching Friday’s jobs report closely ahead of the December 11 BOC decision:

“The
GDP numbers should help to reinforce that interest rates are higher than
they need to be to maintain inflation sustainably at a 2% rate. The BoC
will also be watching next week’s labour market data closely, but our own
base-case assumption is for another 50 basis point cut to the overnight
rate in December.”

At the moment, the BOC is projecting 2% GDP growth in Q4 but that’s likely to be scaled down and the central bank may also take a more-cautious approach for 2025, given Canadian government forecasts for a declining population.

This article was written by Adam Button at www.forexlive.com.

The largest 250 trading firms are set to make a total of $32 billion from trading of Group-of-10
rates and $16.7 billion from currencies, according to data collected by
Coalition Greenwich and reported by Bloomberg. Those are declines of 17% and 9% compared to last year, respectively and the lowest since 2021.

I’m surprised by the decline given the volatility in fixed income and the yen.

This article was written by Adam Button at www.forexlive.com.

Closing changes in Europe:

• Stoxx 600 +0.6%
• German DAX +1.0%
• France CAC +0.7%
• UK FTSE 100 flat
• Spain IBEX +0.3%
• Italy’s FTSE MIB +0.4%

On the week:

• Stoxx 600 +0.4%
• German DAX +1.6%
• France CAC -0.2%
• UK FTSE 100 +0.3%
• Spain IBEX flat
• Italy’s FTSE MIB -0.25%

It was a poor start to the week in Europe but turned around nicely on Thursday and Friday.

This article was written by Adam Button at www.forexlive.com.

The market is pricing in just a 20% chance of a large ECB rate cut on December 12 but JPMorgan thinks that’s not enough. They’re out with a new note calling for 50 bps.

Today’s prelim eurozone core CPI reading for December was 2.7% compared to 2.8% expected. The headline number creeped up to 2.3% from 2.0% but the ECB’s Villeroy was quick to dismiss it.

“We have some good news, inflation has slowed and is going toward our
target,” he said in Dijon on Friday. “We will therefore probably be able
to continue to lower interest rates.”

He added that “in our projections — beyond monthly variations — we are confident that
we will reach our target next year, and probably in the first half of
next year.”

The ECB’s deposite facility rate is at 3.25%.

This article was written by Adam Button at www.forexlive.com.

The S&P 500 has extended today’s gain to 30 points, or 0.5%. The Nasdaq Composite is outperforming, up 0.75%.

Here is something the bulls will be happy to see. The AAII member survey is down to 37% bullish, which certainly isn’t a red flag around sentiment, especially going into the most-bullish month of the year.

What’s difficult about this is that various sentiment survey are all over the place.

In terms of stock sectors, chipmakers are leading the way today on a report that the US restrictions on chip exports to China won’t be as strict as feared.

This article was written by Adam Button at www.forexlive.com.

There is a healthy debate about what’s causing the drop in Treasury yields this week.

Some argue it’s month end flows and rebalancing, while others argue that it’s due to Trump’s pick of Scott Bessent as Treasury Secretary and hints that Kevin Warsh will be Fed chair.

I’m sympathetic to the latter and worries about the economy slowing, in part due to comments this week in earnings from Best Buy and Kohl’s among others.

I’m sympathetic to the month-end argument but the drop in yields has also come with a sharp decline in USD/JPY, which is a much larger market, though it could be a case of the tail wagging the dog.

This article was written by Adam Button at www.forexlive.com.

China’s CSI 300 stock index rose as much as 2.3% today before fading to close up 1.1%. It was the second day of gains but it might be based on flimsy evidence.

So far, the market has been disappointed by Chinese stimulus but hopes are building for more. A report from earlier this week highlighted the possibility of a 25-50 bps RRR cut in December, which isn’t a big surprise.

Eyes are mostly focused on the fiscal side after the October/November numbers were less than hoped.

“There are all sorts of rumors flying around in Chinese social media,” said Nigel Peh, a fund manager at Timefolio Asset Management in Singapore, said in Bloomberg report.

Aside from an RRR cut, some are looking towards a Central Economic Work Conference meeting of top leaders as a time when more could be announced, including a real estate stabilization fund. However another rumor that seemed to gain traction was an unverified screenshot circulated in online showing that the
conference will be held earlier than expected and set the 2025 fiscal deficit
target at a higher ratio.

Buyer beware. But note that Chinese stocks are dangerously consolidating after the big September jump.

This article was written by Adam Button at www.forexlive.com.

• The Q2 reading was +2.1% annualized
• Q/Q reading +0.3% vs +0.5% prior
• Q/Q implicit price index +0.6% vs +1.1% prior

Monthly data:

• September monthly GDP +0.1% vs +0.3% expected (advance est was +0.3%)
• August monthly GDP was previously reported at 0.0%
• Services vs %
• Goods vs % prior
• Manufacturing vs -1.2% prior
• October advance reading +0.1%

These are unimpressive numbers, with Sept and Oct both now running at 0.1%.

Meanwhile, on a per capita basis, Canadian GDP fell 0.4% in the third quarter, which was the sixth consecutive quarterly decline. The only think keeping the Canadian economy alive has been mass population growth.

This article was written by Adam Button at www.forexlive.com.