Macro Roundup (Nov 2)

SHANGHAI, Nov 2 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

Most LME and SHFE base metals ended in the black overnight with LME nickel being the best performer, up 2.5% on the day. LME copper and zinc surged 2.3%, lead jumped 1.75%, aluminium rose by over 1% while tin stayed flat.

SHFE nickel increased by 1.4%, copper gained close to 1%, lead advanced some 0.9%, tin went up 0.24% and zinc inched up 0.2% while aluminium dipped 0.1%.

The US dollar retreated from multi-month highs on Thursday while the pound rose the most in nine months on reports that London is close to a financial services deal with Brussels.

A British official said that London was close to a deal that will grant UK-based financial services firms basic access to the rest of the European Union markets.

The Bank of England (BOE) announced it would keep interest rates unchanged on Thursday and this also bolstered the sterling, but the BOE also hinted at faster rate increases if Brexit goes smoothly.

The yuan rebounded substantially overnight after a "very good" talk between US President Donald Trump and Chinese President Xi Jinping.

President Trump said in a tweet on Thursday that he had a "long and very good conversation" with President Xi on trade and North Korea and that the two planned to meet at the upcoming G-20 summit.

Chinese factory activity expanded in October despite an ongoing trade dispute with the US, Caixin data showed.

On Thursday, Caixin reported that October purchasing managers' index (PMI) was 50.1 for October, beating analysts' expectations. A reading above 50 indicates expansion, while a reading below that signals contraction.

Despite the better-than-expected headline number and slight expansion in manufacturing activity for October, a detailed reading of the survey showed softness in the Chinese economy.

The sub-index for new orders improved from a two-year low in September but remained in negative territory. New export sales dropped for the seventh straight month.

"China's economy has not seen obvious improvement," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a Caixin subsidiary in a press release.

"Overall, expansion across the manufacturing sector was still weak. Production and business confidence continued to cool despite stable demand. The pressure on production costs didn't ease," Zhong added.

New applications for US unemployment aid fell last week and the number of Americans receiving benefits was the lowest in more than 45 years as labour market conditions tightened further.

Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 214,000 for the week ended October 27, the Labor Department said on Thursday. The Department added that claims for North Carolina continued to be affected by Hurricane Florence, while Hurricane Michael impacted those for Florida and Georgia.

The seasonally adjusted Markit final US manufacturing PMI posted 55.7 in October, broadly in line with September's reading of 55.6. The latest figure signalled a further pick-up in growth momentum and a strong improvement in manufacturing. October's reading also stood at a five-month high.

Chris Williamson, chief business economist at IHS Markit said: "The manufacturing sector saw a strong start to the closing quarter of 2018, with new order inflows rising sharply and business optimism spiking higher in an encouraging sign that firms expect the good times to continue into 2019.”

“The increasingly bullish mood was also reflected in one of the largest monthly increases in factory payroll numbers seen over the past seven years as firms grew capacity to meet rising workloads,” Williamson added.

The Institute for Supply Management (ISM) reported a slower-than-expected growth in US manufacturing activity for October with a gauge of new orders easing to its lowest level since April 2017.

The ISM on Thursday said its index of US-based factory activity dropped to 57.7 last month from 59.8 in September, compared to the expected reading of 59.

An index tracking new orders registered 57.4, a decrease of 4.4 from the September reading of 61.8.

"Demand remains moderately strong, with the new orders index easing to below 60 for the first time since April 2017, the customers' inventories index remaining low but improving, and the backlog of orders index remaining steady," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a press release. "Consumption softened, with production and employment continuing to expand, but at lower levels compared to September."

Day ahead

The IHS Markit today will release its October manufacturing final PMI for Germany and the eurozone. The US will release October nonfarm payrolls, the September trade balance, durable goods orders and factory orders.