Something for your Espresso: Running on fumes?
Morning from Europe.
Despite decent European PMI numbers from a sequential perspective, we still see Europe being in a shallow recession already. The PMI number to watch from Europe is now the employment sub-survey and composite expectations for employment in both France and Germany dropped below the all-important 50 handle. Is the labor market finally giving in?
The short-term positive seasonality in US key figures will likely not be seen as bullish news for markets due to the expected reaction in front-end USD rates. We are on high alert ahead of the ISM Manufacturing / ISM Services releases and we will take early clues from the S&P PMI later today from the US.
Chart 1: ISM Services model through the roof for November
The strong US data seasonality into year end could wreak havoc with the current early Santa Rally in cyclicals. We are on high alert for a hawkish reaction function in December.