Chinese Economic Indicators Flash Red
Bank of Japan Governor Ueda’s comments coincided with Chinese manufacturing sector PMI data, which signaled a loss of economic momentum. The RatingDog China General Manufacturing PMI fell from 50.6 in October to 49.9 in November, indicating a moderate sector contraction. Notably, new order growth slowed, and firms reduced staffing levels to manage costs.
However, one bright spot from the November survey suggested a potential rebound in sector activity. According to the November survey, new export orders increased at the fastest pace in eight months, indicating a pickup in external demand.
The RatingDog survey came after the NBS PMI reports on Sunday, November 30. Notably, the NBS Non-Manufacturing PMI fell from 50.1 in October to 49.5 in November, dropping below the 50 neutral level for the first time since 2022.
The drop in services sector activity indicated weakening domestic demand, pressuring Beijing to roll out new subsidies to boost consumption.
Expectations of fresh stimulus measures aimed at bolstering domestic demand would likely raise demand for risk assets. However, the Fed and the BoJ’s monetary policy decisions and USD/JPY trends will remain key in the week.
Given these dynamics, the near-term outlook appears bearish.
US ISM Manufacturing PMI and Fed Speakers in Focus
Futures reversed their gains from Friday, November 28, during the Asian session. The Dow Jones E-mini fell 201 points, the Nasdaq 100 E-mini declined 209 points, while the S&P 500 E-mini dropped 42 points.
Later on Monday, ISM Manufacturing PMI data and Fed speakers will likely influence risk sentiment. Economists forecast the ISM Manufacturing PMI to fall from 48.7 in October to 48.6 in November. A sharper drop would support a more dovish Fed rate path.
Additionally, growing calls from FOMC members for a December Fed rate cut would likely cement bets on a December cut. While the rising risk of a yen carry trade unwind weighed on sentiment, a cautious Fed policy outlook and a single BoJ rate hike would likely boost demand for risk assets.
However, traders will likely need clear guidance from the December press conferences. Market caution would support a bearish short-term (1-3 week), but more bullish medium-term (3-5 week) outlook.
Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500
Despite the morning losses, the Dow Jones E-mini, the Nasdaq 100 E-mini, and the S&P 500 E-mini remained above their 50-day and 200-day EMAs, signaling a bullish bias. However, fundamentals have started to shift from the technical trend, supporting a bearish short-term outlook.
Near-term trends will hinge on BoJ and Fed speeches, US data, and USD/JPY price trends. Key levels to monitor include:
Dow Jones
- Resistance: 47,750, 48,000, and the November 12 record high of 48,528.
- Support: 47,500, 47,000, the 50-day EMA (46,785), 46,000, and then the November 21 low of 45,779.