On Monday, fresh data showed that China’s factory activity improved marginally in November, although it remained in contractionary territory. The composite PMI slipped to 49.7, signalling ongoing weakness – since readings above 50 indicate expansion, while those below reflect contraction. Manufacturing activity has experienced a downturn of late, showing little progress despite a recent agreement with South Korea that softened tensions arising from the Liberation Day tariff dispute. Economists note that subdued domestic demand continues to weigh on output, limiting rebound even while companies expressed confidence in sales and production prospects over the coming year, with sentiment strengthening compared to October. While supportive government policies would no doubt be welcome for the region, policymakers have refrained from deploying additional stimulus of late, confident that the economy remains broadly on track to meet its 5% annual growth target.
Elsewhere, President Macron is set to visit China this week for his fourth state trip. The timing is significant, given intensifying trade competition between Europe and China. European manufacturers have struggled to compete with lower-cost Chinese exports, which continue to erode market share across global value chains. Macron’s advisers suggest he will press for a recalibration of trade terms, advocating measures that support stronger Chinese domestic consumption and arguing that the “gains from innovation should be shared” between the two.
Meanwhile, traders may have seen the first tangible outcome of the recent U.S.–China summit. Beijing has reportedly issued new rare export licences to select customers, enabling shipments to move more quickly and at potentially higher volumes. China had previously created bottlenecks by requiring firms to apply for export authorisation case-by-case, stalling auto supply chains. The introduction of broader, year-long “general licences” signals a partial easing of those restrictions and could help normalise trade flows.
Over in the Eurozone, consumer price inflation ticked up to 2.2% in November from 2.1% in October. Core inflation – excluding volatile categories such as energy and food – remained steady at 2.4%. Although the headline figure only inched higher, services inflation accelerated to 3.5% from 3.4%, marking its highest level since April. This stickiness in services prices may complicate the European Central Bank’s (“ECB”) policy stance: while the ECB paused interest rate cuts for a third successive meeting in October, persistent inflationary pressures could delay any further easing. For now, policymakers reaffirm their data-dependent approach, emphasising flexibility in response to evolving price dynamics.
Still to come this week we have Eurozone GDP, and U.S. PCE and Michigan Consumer Sentiment.
Nicola Tune, Portfolio Specialist
