The Day at a Glance | November 23 2022

*The European economy surprised to the upside with a slight improvement in November.

*Details about the FED`s terminal rate are expected to be made known once the central bank`s meeting minutes are revealed this afternoon.

*Markets expect the banking sector`s capital requirements rate to decrease in China on Friday – as a stimulus measure.

*Railway worker unions in the US threaten to go on strike, which could affect supply.

*IMF suggests China change its COVID policy and back the real-estate sector.

*Mortgage rates in the US decreased for a second consecutive month to their lowest levels in two months (6.67%, 30 years).

*Russia resumed attacks on Ukrainian infrastructure.

*The White House extends pause on student loan payments until June.

*November`s PMI`s are expected to be made known in the US.

Economic environment

Europe`s economic contraction became more moderate. November`s timely PMI`s surprised to the upside in Europe and pointed out a more moderate contraction and a slight improvement in economic activity. The Composite PMI increased to 47.8, an improvement with respect to the previously recorded 47.3, although the economy is still in contractionary territory (5 consecutive months) and is headed towards a recession. Nevertheless, the contraction could be lighter than expected. Manufacturing activities logged the best performance (47.3) thanks to shorter delivery times and an improvement in input availability as production chains are replenished. In the services sector (48.6), the contraction maintained the previous month`s pace. In addition to the manufacturing sector`s positive news, indicators show a slowdown in prices, which could help ease the cost of living crisis that is affecting the region. At the moment, benevolent temperatures in Europe have kept energy prices stable and have helped ease fears of scarcity before winter. The more positive inflationary outlook could help drive the ECB towards it tightening financial conditions less aggressively.

FED meeting minutes. The central bank`s most recent meeting minutes (Nov 1-2) will be made known this afternoon. In the meeting, the FED pointed out the possibility of easing interest rate increases, but warned the need for the terminal rate to be higher than what markets expected. The minutes will reveal how much support there is among members to take the interest rate to higher than expected levels in 2023 despite a moderation in interest rate increases in the Federal Reserve`s last meetings. It`s possible that the documents could show a divided FED; and the lack of a consensus could benefit risky assets in markets as this could point out there is no unanimous support for Powell`s stance on higher than forecasted rates made known in September (4.5%). It`s likely that the minutes will also reveal some risks that the members will focus on in the following months given the aggressive adjustments made up to now. Through these risks, specific conditions could force an anticipated break in the increasing rates cycle.