The Day at a Glance | December 5 2023

*The speech of the Fed Chairman pressured the 10-year Treasury bond rates, leading markets to recalibrate expectations regarding future actions of the Federal Reserve.

*Moody’s downgrades the credit rating outlook for China due to increasing government support and the real estate crisis.

*Eurozone PMIs were revised upwards, temporarily easing recession fears.

Economic environment

The final PMIs of the Eurozone were published and revised upwards to 48.7 points, yet still showing strong signs of contraction. Despite temporary relief, the possibility of a recession in the Eurozone at the end of 2023 is not ruled out. In China, the service sector PMI rose from 50.4 to 51.5, exceeding the estimated 50.7, signaling a recovery in the region. However, the rating agency Moody’s downgraded China’s credit outlook from “stable” to “negative,” citing concerns over increasing local government debt and the country’s real estate crisis.

Interest rates for the 2-year and 10-year terms in the U.S. secondary market remain under pressure following last Friday’s comments from Fed Chairman Jerome Powell. After Powell’s intervention, markets began to estimate that the cuts that have been incorporated into the futures might be too optimistic, and since yesterday’s session, they are recalibrating expectations about when the Federal Reserve will start an accommodative cycle. Additionally, investors are awaiting the employment report to be published on Friday, with an estimate of 180,000 new jobs (more than the previous month) while the unemployment rate is expected to be 2.9%. Later today, the service sector and composite PMIs will be released, where the composite is expected to remain unchanged, and the services PMI to experience a slight increase.