The HSBC Chinese November flash PMI came in at 50.4 M/M, the first time its been above 50 in 13 month sand as opposed to 49.5 in October. The output sub-component hit 51.3, the highest since October 2011. Chinese data has improved in recent months;

The Chinese government has issued passports. The map of the country included in the passport covers all the disputed areas. Next they will be publishing a map, of China, which includes Australia, India (well maybe not, they don’t want to deal with the problems), Europe and, of course, lets not leave out the US !!!! This kind of stuff just incites the population and leads to problems;

Inflation in South Africa rose to +5.6%, from +5.5% in September, due to prices increases of food and drink. However, a new inflation basket will raise prices in 2013. The business confidence index declined marginally to 47, from 46, surprising given the recent labour problems. The consumer sector on the other hand has improved. Having said that business investment is declining materially, given the labour and political problems. The Central Bank is expected to keep rates on hold next Thursday. I remain (increasingly) bearish of South Africa and I remain short the Rand against the US$. (Source FT).

EU heads of State met today to discuss the budget for 2014/20 – an agreement has not been reached. The UK PM has, at least, got to reach a deal which involves a freeze in the budget. Reports of some form of compromise are circulating, though normally these negotiations take quite some time to settle – Mrs Merkel suggested in the New Year.;

German November flash manufacturing PMI came in at 46.8, better than the 46.0 expected and 46.0 in October. German November flash services PMI came in at 48.0, as opposed to 48.3 expected and 48.4 in October. The German November flash composite PMI came in at 47.9, lower than the 48.1 in October;

French November flash manufacturing PMI came in at 44.7, as opposed to 44.0 expected and 43.7 previously. French November flash services PMI came in at 46.1, better than the 45.0 expected and 44.6 in October. The French November flash composite index came in at 44.5, better than the 43.5 in October;

EZ November flash manufacturing PMI came in at 46.2, better than the 45.5 expected and 45.4 in October.  EZ November flash services PMI came in at 45.7, slightly lower than the 46.0 expected and 46.0 in October. EZ November flash composite PMI  came in at 45.8, in line with expectations and slightly higher than 45.7 in October;

US October leading indicators came in at +0.2% M/M, better than +0.1% expected and revised +0.5%;

Outlook

Asian markets (ex China) closed higher on better US and Chinese data. European markets closed higher as well. US markets are closed for Thanksgiving. However, market volumes were even more anemic, given the US holiday. The Euro, well its rising on hopes of a deal on Greece (likely) and is at US$1.2871. Spot gold is trading around US$1730, with investors continuing to be positive. January Brent is trading around US$110.53.

The Yen has recovered and currently trading at Yen 82.32 against the US$. Mr Abe repeated that he may change the Bank of Japan act, if elected. Please note I remain materially short the Yen against the US$.

The EZ’s composite PMI came in in line with expectations, though remain below the neutral level. Cant really see any pick up in coming months.

Whilst markets have risen over the last few days, investors optimism on speculation that US politicians will reach an agreement in respect of the US fiscal cliff appears overly optimistic to me. Whilst I believe that a “deal” will be done, this issue is going to go down to the wire, indeed a compromise, after 1st January 2013, is likely.

May I just take this opportunity to wish all my American friends the very best on this Thanksgiving day.

Kiron Sarkar

22nd November 2012

Category: Think Tank

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