Summary:
The ISM Services PMI was released and the number was higher than last month (56.5 in November of 2022, vs 54.4 in October). Business activity increased faster (64.7 vs 55.7) and employment rebounded (51.5 vs 49.1), prompted by a new fiscal period and the holiday season. Also, price pressures eased (70 vs 70.7), inventories shrank less (47.9 vs 47.2) and supplier deliveries continued to slow (53.8 vs 56.2), with increased capacity and shorter lead times accounting for an improvement in supply chain and logistics performance. Meanwhile, a slowdown was seen in new orders (56 vs 56.5) and backlogs of orders (51.8 vs 52.2).
The Producer Price Index for final demand in the US rose 0.3% month-over-month in November of 2022, the same as an upwardly revised 0.3% increase in October and above market forecasts of 0.2%. Cost of services went up 0.4%, the biggest gain in three months, led by securities brokerage, dealing, investment advice, and related services, which jumped 11.3%. Cost of goods edged up 0.1%, led by a 38.1% surge in prices for fresh and dry vegetables while gasoline prices dropped 6%. Compared to the same month in 2021, producer prices were up 7.4%, the smallest increase since May last year, but higher than expectations of 7.2%.
Next week, all eyes will be on the US CPI report (Tuesday) and Fed Interest rate decision(Wednesday), and, especially the conference after the decision, where the hawkishness of the central bank will probably push the markets down, avoiding further near term rallies and the easing of monetary conditions.
Economic data source: Trading Economics
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A Walk Around the Markets
US stocks closed lower on Friday, with the Dow losing more than 300 points, and both the S&P 500 and the Nasdaq falling 0.7% as investors digested a slew of economic releases and remained concerned about the rate hikes. The producer price index, rose 0.4% in November, while analysts expected a modest 0.2% gain. On the other hand, the University of Michigan’s consumer confidence unexpectedly improved showing a drop in short-term inflation expectations to the lowest level in more than a year. Meanwhile, the Fed is set to raise rates by only 50 bps next week but it may not be possible for the central bank to architect a soft landing and prevent a recession. On the corporate side, DocuSign surged over 15% on better-than-expected quarterly results, while Lululemon tumbled 12% after issuing weak Q4 guidance. For the week, the Dow fell 2.8%, its worst week since September while the S&P 500 was down 3.4%, and the Nasdaq shed 4%.
Silver futures rose to above $22.6 per ounce at the start of December, hovering at levels not seen since May amid expectations for a slowdown in monetary tightening by the Federal Reserve. Fed Chairman Powell stated that it is likely that the US central bank will slow the aggressiveness of rate hikes this month, easing demand for the dollar and driving investors toward bullion. Besides bullion, softer rate hikes in the US and a cut in the reserve ratio by the PBoC supported expectations of higher demand for industrial silver usage as electricity conductors, tracking the rebound for copper. Signs of low supply also supported prices, as New York’s COMEX inventories fell 70% in the last 18 months to just over 1 million tonnes. Also, the London Bullion Market Association stockpiles fell for the 10th straight month to a record-low 27.1 thousand tonnes in November.
