December 06, 2022

Daily Report 06/12/2022

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The UK PMI services-sector index was confirmed at 48.8 for November  and the lowest reading since January 2021. Business confidence increased marginally for the month while the increase in output prices slowed to a 10-month low. Overall confidence in the UK economy remained fragile, especially with expectations of a prolonged downturn next year as higher energy prices bite. Risk conditions remained a key influence during the day with choppy overall Sterling trading. BRC data recorded an annual like-for-like increase in retail sales of 4.1% in the year to November, but this implied a further decline in real sales.

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The final reading for the Euro-Zone PMI services-sector was revised marginally lower to 48.5 from the flash reading of 48.6 despite stronger than expected readings for the Italian and Spanish data with the latter moving into expansion territory. The index overall was confirmed at a 21-month low while business confidence recovered slightly from 28-month lows. Inflation pressures eased slightly which will provide some comfort for the ECB. The Euro-Zone Sentix economic confidence index posted a significant recovery to -21.0 for December from -30.9 the previous month and significantly above consensus forecasts of -27.6. According to Sentix, investor confidence has been boosted by hopes for mild winter weather conditions and high gas storage levels. There were also hopes that inflation has passed its peak which provided important relief. The ECB meeting will be held next week. ECB council member Makhlouf stated that the most likely outcome was a 50 basis-point rate hike at the December policy meeting, although he added that he wouldn’t rule out a 75 basis-point hike.

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The US ISM non-manufacturing index strengthened to 56.5 for November from 54.4 the previous month and significantly above consensus forecasts of 53.3. There was a stronger pace of business growth for the month with a steady rate of growth in new orders and employment returned to growth, although job gains were very limited. Export orders were notably weak for the month while there was only a slight easing of inflation pressures. Treasuries continued to edge lower following the data with the 10-year yield edging higher amid expectations that the Fed would need to maintain a hawkish stance.

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