Macroeconomic View Markets 2 Dec. 2016

Good Morning All;
U.S. factory activity accelerated to a five-month high in November amid a pickup in new orders and production, suggesting that the manufacturing sector was regaining its footing after a prolonged slump. Thursday’s report from the ISM, which also showed some bottlenecks in the supply chain that could drive prices higher, was the latest indication that the economy continued to gain momentum in Q4. ISM Manufacturing rose 1.3% to 53.2 last month, its best since June. Manufacturing accounts for 12% of the US economy. Construction spending rose less than expected at 0.5%  from -0.4%. A separate data showed initial jobless claims rising to its highest level in five months last week to 268K  from 251K prior.
Manufacturers around the globe performed strongly in November, but concerns about the protectionist leanings of U.S. President-elect Trump and an OPEC-induced oil price rally could curtail future growth. Factories across Asia and Europe ramped up activity and data due later on Thursday from the US are expected to show manufacturers in the world’s largest economy also pushed harder on the accelerator. IHS Markit’s final manufacturing PMI for the euro zone chalked up its highest reading since January 2014 in November, registering 53.7, in line with an earlier flash estimate and ahead of October’s 53.5. But British Manufacturing PMI cooled unexpectedly to 53.4 from 54.2.
Britain would consider making payments to the EU after it leaves to achieve the best possible access for businesses to the bloc’s markets, Brexit minister David Davis said on Thursday. The government is formulating its negotiating position ahead of formal divorce talks next year, and businesses have been seeking reassurance that it won’t seek a “hard Brexit” which would prioritise curbing immigration over remaining in the EU single market.
The pace of growth in Canadian manufacturing picked up modestly in November as a measure of new orders rose to its highest level in seven months, data showed on Thursday, and an encouraging sign for a sector that has struggled to make strong gains this year. The RBC Canadian Manufacturing PMI, a measure of manufacturing business conditions, rose to a seasonally adjusted 51.5 last month from 51.1 in October. A reading above 50 indicates growth in the sector.
Brazilian manufacturing extended its decline in November as a sharp currency drop raised costs, a survey showed on Thursday, suggesting market volatility following the election of Donald Trump as U.S. president might have worsened an already deep recession. The PMI compiled by research firm Markit edged down to a seasonally adjusted 46.2 in November from 46.3 in October. The PMI index has remained below the 50 threshold separating expansion from contraction since February 2015.
Mexican Central Bank Governor Agustin Carstens will stand down in July amid rising doubts about the direction of Latin America’s No. 2 economy following the election of Donald Trump as U.S. president. The central bank on Thursday announced the impending departure of the 58-year-old Carstens, who has been at the helm of the central bank since 2010 and whose term had been due to conclude at the end of 2021. Carstens, a former Mexican finance minister and highly respected by international investors, will leave to take the top job at the Bank for International Settlements in October for a five-year term, the Basel-based BIS said.
Russian President Vladimir Putin played a crucial role in helping OPEC rivals Iran and Saudi Arabia set aside differences to forge the cartel’s first deal with non-OPEC Russia in 15 years. Interventions ahead of Wednesday’s OPEC meeting came at key moments from Putin, Saudi Deputy Crown Prince Mohammed bin Salman and Iran’s Supreme Leader Ayatollah Ali Khamenei and President Hassan Rouhani, OPEC and non-OPEC sources said. Putin’s role as intermediary between Riyadh and Tehran was pivotal, testament to the rising influence of Russia in the Middle East since its military intervention in the Syrian civil war just over a year ago.
Sharp cutbacks in Australian business investment has opened the real possibility the economy shrank last quarter for the first time in almost six years, a blow to the conservative government of Malcolm Turnbull which has staked its future on growth. Thursday’s figures from the ABS’s showed investment fell 4% in Q3, when analysts had looked for a drop of only 2.5%.The broad-based weakness at home will disappoint to the RBA which has pinned much on a revival in animal spirits outside of the hard-hit mining sector.
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