Key events to watch in the week ahead: 2 – 8 December 2024

This week’s overview

A holiday-shortened week in the US brought light trading across the board, but major US indices remain set for its second straight week of gains as the US dollar unwound some of its gains, alongside a drift lower in Treasury yields.

Market volatility will likely pick up next week, as a series of labour market indicators may bring the debate around the Federal Reserve (Fed)’s next move back on the table. A 25 basis point (bp) rate cut remains the consensus, but there are still some reservations around it, with the rates market pricing a 34% chance for a no-move. For now, we continue to tread in the period, where seasonality tends to be favourable for the risk environment.

Heading into the new week, here are four key events to watch.

2 December 2024 (Monday, 9.45am SGT): China’s Caixin manufacturing Purchasing Managers' Index (PMI) / 4 December 2024 (Wednesday, 9.45am SGT): China’s Caixin services PMI

The China’s Caixin PMI reflects economic activities around smaller private-sector companies, as compared to the official PMI data, which comprise of larger state-owned firms. The October read has revealed some green shoots, where the manufacturing PMI rose to 50.3 from the 49.3 prior, and marked a return to expansion.

The Caixin services PMI improved to 52.0 from the 50.5 prior as well, showing expansion for the 22nd consecutive month. Combined, the composite PMI rose to 51.9, reflecting its fastest growth in four months.

While the improvement in economic activities may reflect some degree of success from China’s late-September stimulus measures, focus will be on whether the recovery momentum can continue into November without a stronger fiscal injection into the economy. More clarity may also be sought on whether the strong improvement in new orders is a result of front-loading ahead of US economic pressures, or if there is more sustainable underlying demand conditions at play.

Expectations are for China’s November Caixin manufacturing PMI to reflect an improvement to 50.5, up from the 50.3 in October.

4 December 2024 (Wednesday, 8.30am SGT): Australia’s Q3 gross domestic product (GDP)

Australian GDP increased by 0.2% in the June quarter of this year for an annual rate of 1.0%. While the Australian economy grew for an eleventh consecutive quarter, excluding the COVID-19 pandemic period, it was the lowest growth rate since 1991-92 - the year that included the gradual recovery from the 1991 recession.

The market consensus is for the annual rate of growth to remain at 1% in Q3. The Reserve Bank of Australia’s (RBA) updated forecasts contained in the November Statement of Monetary Policy have GDP rising to 1.5% in Q4 before a pickup to 2.3% by June 2025. Despite expecting another slow quarter of growth, the interest rate market is not anticipating a first 25 bp rate cut until May next year.

2 December 2024 (Monday, 11pm SGT): US Institute for Supply Management (ISM) manufacturing PMI / 4 December 2024 (Wednesday, 11pm SGT): US ISM services PMI

For September 2024, the US manufacturing and services sectors showed mixed performance. The PMI numbers signal a continued contraction in the manufacturing sector for the seventh consecutive month (46.5 versus 47.6 consensus), while services activities expanded for the fourth consecutive month at 56.0 (53.8 consensus).

The divergence suggests that the services sector continue to be engine of growth for the US economy, while weak global demand has been headwind for the manufacturing sector. That said, the broader theme still leans towards a potential soft landing in the US economy, given the run in upside economic surprises since August 2024 while the Fed’s easing process is likely to continue into 2025.

Ahead, expectations are for US ISM manufacturing PMI to show a lesser contraction at 47.5, up from the 46.5 in October. Non-manufacturing PMI is expected to come in at 55.5, down slightly from the 56.0 prior, overall pointing to US economic resilience.

6 December 2024 (Friday, 9.30pm SGT): US non-farm payrolls

The October read for US non-farm payrolls was mixed. The US economy added just 12k jobs compared to the 113k expected. Some of the weakness was driven by hurricane disruption, while strikes also accounted for a 37k decline. The weak headline numbers were accompanied by downward revisions of 112k jobs over the past two months. Providing some offset, the household survey, which was presumably less hurricane-affected, showed a steady unemployment rate of 4.1%.

For November, the preliminary expectation is for the US economy to add 200k jobs and for the unemployment rate to edge higher to 4.2%. The US interest rate market is pricing in a 50% chance of a 25 bp rate cut at the December Fed meeting, with a weaker-than-expected job number likely to see that pricing move closer to 70%.