With dropping expectations and an only somewhat improving current assessment, the November Ifo index suggests that the German economy remains deeply stuck in stagnation at year-end
The composite PMI remained broadly unchanged in November (52.4 compared to 52.5 in October), which is well above the neutral level of 50. This suggests that growth in the short run remains decent despite significant global headwinds
China’s manufacturing purchasing managers’ index saw a broad-based decline in October, while the non-manufacturing PMI managed to edge back into expansionary territory. Industrial activity has held up well despite soft PMI data year-to-date. Even so, this steeper downturn may raise some concerns
The Ifo index increased in October on the back of improving expectations, while the current assessment worsened once again
We expect the Reserve Bank of New Zealand to cut rates by 25bp on 8 October, in line with consensus and pricing. Markets are betting on two more cuts after October, which looks a bit premature having not yet seen third-quarter CPI data. Dovish bets suggest downside risks for NZD are reduced into year-end
Germany’s chancellor-in-waiting Friedrich Merz announced plans for a major increase in defense and infrastructure spending. If passed by the German parliament, the plans would mark a significant fiscal shift that has the potential to boost growth and support Eurozone assets.
The USD declined significantly over the last four weeks with the biggest gains for the SEK and the JPY, while AUD, CAD and NZD lagged behind. EM currencies were on balance stronger as well but with more dispersions.
