Japan Manufacturing PMI Picks Up In Nov But Still In Contraction; Services Strong

Summary:

Japanese manufacturing activity picked up in November but still remained in contraction territory, while services were strong, preliminary purchasing managers index data showed on Friday.

The S&P Global manufacturing PMI rose to 48.8 in November from 48.2 in the prior month. A reading below 50 indicates contraction, with the sentiment-based print signaling that Japanese manufacturers still remained largely negative over their prospects.

But manufacturing PMI still contracted at its slowest pace in three months, pointing to some improvement.

Sticky inflation, however, pushed up input and selling prices, while overall demand for manufactured goods also remained weak.

Services were a point of support, with the S&P Global services PMI remaining at 53.1 in November, the same as October. This helped Japan's composite PMI rise to 52.0 in November from 51.5 in October.

Sentiment was seen improving marginally as Prime Minister Sanae Takaichi flagged plans for more fiscal support. But doubts over how Takaichi will fund her spending plans also crept into markets, sparking a rout in bonds in November.

Inflation also remained a key concern for business, as both input and selling costs increased. Friday's PMI data comes shortly after government data showed consumer inflation rose as expected in October.

Source: Investing

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Daniel Carter

Forex

Economic

Japan issued its strongest warning yet to foreign exchange markets over sharp movements in the yen, with the nation's finance minister specifically mentioning intervention as an option as she tries to push back against continued falls in the currency.

"The government will take appropriate action against disorderly FX moves, including those driven by speculation as needed, in line with the approach set out in the Japan-US joint statement issued in September," Finance Minister Satsuki Katayama told reporters on Friday. "Since the Japan-US finance ministers' paper in September clearly included FX intervention, that's naturally something we can consider."

Katayama said she is deeply concerned about recent foreign-exchange moves, which she described as extremely one-sided and rapid.

The yen briefly strengthened after Katayama spoke, to briefly touch 157.20 against the dollar from around 157.43, before giving up all of those gains as it continues to hover near its weakest levels since January.

Market players are eyeing the 160 per the dollar mark, a level around which the authorities stepped into the market repeatedly last year.

Several factors are weighing on the yen, including speculation that Takaichi's pro-stimulus policies might deter the BOJ from hiking its benchmark rate in the near term at a time when bets on a US Federal Reserve cut have receded.

Japan government panel member Takuji Aida suggested in an interview with Bloomberg on Thursday that Japan may be closer to intervening than the market generally assumes and could move before the yen reaches 160.

He noted that Prime Minister Takaichi's government, which believes in Japan's fiscal soundness, is in a stronger position to tap into its ample foreign reserves if needed.

In September, US Treasury Secretary Scott Bessent and former Japanese Finance Minister Katsunobu Kato reaffirmed in a joint statement their basic commitment to let markets determine currency exchange rates and not to target them for a competitive advantage.

The two chiefs also agreed to leave scope for intervention in certain circumstances in line with previous statements, saying that it should be reserved for dealing with excess volatility or disorderly movements in the currency market.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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Daniel Carter

Political

Russia-Ukraine Conflict

The chief of Russia's general staff told President Vladimir Putin on Thursday that Russian forces had taken control of the northeastern Ukrainian city of Kupiansk, but Ukraine's military denied the city had changed hands.

Ukraine also dismissed Russian statements that its forces had taken over large parts of two other towns -- Pokrovsk, a logistics hub it has been pressing to capture for months, and Vovchansk, near the Russian border.

Putin had visited the command post of the Russian forces "West" grouping, where he met with chief of staff Valery Gerasimov, and top military brass, the Kremlin said earlier.

Putin had been briefed on the situation in two key cities in Ukraine's east -- Kostiantynivka and Kramatorsk -- as well as around Kupiansk in Kharkiv region, the Kremlin said.

"Units of the 'West' grouping have liberated the city of Kupiansk and are continuing to destroy Ukrainian armed forces units surrounded on the left bank of the Oskol River," Gerasimov told Putin in a video posted on the Kremlin site.

Gerasimov, seated among top officers opposite Putin, who was also in military uniform, told the president that Russian forces had taken control of 70% of Pokrovsk. He said more than 80% of Vovchansk was also under Russian control.

The heaviest fighting along the 1,200-km (775-mile) front line was near Pokrovsk, he said, with Ukrainian forces offering "stiff resistance".

It was not clear from the video exactly where the meeting with Putin had taken place.

UKRAINE DISPUTES TERRITORY LOSS

A late-evening statement by the Ukrainian military said: "The General Staff of Ukraine's armed forces hereby announces that Kupiansk is under the control of Ukraine's defence forces."

"Also untrue are statements suggesting that 80% of Vovchansk in Kharkiv region has been captured and 70% of the city of Pokrovsk," it added.

The general staff reported heavy fighting in the Pokrovsk sector, with Russian forces launching 56 attacks.

Russian forces have been engaged in a slow westward advance through Donetsk region as part of their campaign to capture all of the Donbas -- made up of the Donetsk and Luhansk regions.

Russian forces have also made recent gains further south in Zaporizhzhia region. They currently hold about 19% of Ukraine's territory.

Source: Reuters

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Manuel

Stocks

Political

Mark Zuckerberg and current and former leaders of Meta Platforms (META) agreed to pay the company $190 million to resolve shareholder allegations that they damaged Meta by violating Facebook users' privacy, according to a settlement unveiled on Thursday.

The deal ended litigation by shareholders who accused the Facebook co-founder and other defendants of saddling the company with billions ‌of dollars in fines and legal costs stemming from violating privacy regulations.

The agreement fleshes out a deal announced in court on July 17 that ended a scheduled eight-day trial on its second ‌day. Shareholders were seeking $8 billion from Zuckerberg and 10 current and former directors and officers for allegedly allowing Facebook users' personal information to be accessed without their consent.

The defendants had denied all allegations.

The settlement dramatically cut short the trial before a string of high-profile witnesses took the stand, including Zuckerberg, billionaire investor and Meta board member Marc Andreessen, former Chief Operating Officer Sheryl Sandberg, and former Facebook board members Peter Thiel, the co-founder of Palantir Technologies,⁠ and Reed Hastings, the co-founder of ‌Netflix.

Facebook in 2021 changed its name to Meta, which is also the parent company of Instagram and WhatsApp. The company was not a defendant.

“As one of the largest cash recoveries ever in a derivative action, this settlement confirms that ‍proper oversight of a company’s compliance obligations is not optional - it’s essential,” said Geoff Johnson, an attorney with Scott + Scott, one of the firms that led the litigation.

Derivative lawsuits recover money from directors and executives, which is paid to the company and therefore benefits shareholders indirectly. Boeing directors agreed to a record settlement in an oversight case in 2021 for $237.5 million. The settlements in derivative cases are often paid from directors' ‌and officers' liability insurance policies.

The shareholders who brought the case, including public employee pension funds, claimed directors failed to oversee Zuckerberg and Sandberg, who were allowed to run an illegal data-harvesting enterprise.

The lawsuit was filed in the wake of the scandal surrounding Cambridge Analytica, a now-defunct British political consulting firm.

The firm secretly accessed data from tens of millions of Facebook users to create targeted messages for clients that included Donald Trump during his successful U.S. presidential campaign in 2016. Officials from Trump's 2016 campaign have said Cambridge Analytica played a minor role in the election.

Those revelations led to a ⁠record $5 billion fine by the Federal Trade Commission and a series of other legal settlements. Zuckerberg was also accused of trading Meta stock to benefit from inside information.

A judge in 2023 declined to dismiss the lawsuit before trial and called the allegations "wrongdoing on a truly colossal scale," but experts said the legal standard meant it was still going to be a difficult case for investors.

The defendants said the evidence ‍at trial would have shown that Facebook had ⁠robust operations to protect user data. They accused Cambridge Analytica of deceit.

The oversight allegations are known as Caremark claims, considered the most difficult to prove under Delaware corporate law. If plaintiffs had prevailed in the trial, the case would have been appealed to the Delaware ⁠Supreme Court.

“This was the first case to take a Caremark claim to trial, and, in the process, we sent a clear message that even the most powerful directors and officers must ‌take their oversight obligations seriously," said Maxwell Huffman, another Scott + Scott attorney.

Source: Reuters

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Manuel

Stocks

Political

Wall Street stocks slid on Thursday in a sharp reversal from an early rally, as technology gains faded after a boost from Nvidia's earnings and U.S. jobs data muddied the labor market outlook.

Shares of Nvidia (NVDA.O) ended lower after surging as much as 5% earlier in the day. Most chip-related companies also were negative, with an index of semiconductors (.SOX) also down.

Both the Nasdaq and Dow swung more than 1,000 points from their highs of the day to their lows, with the Nasdaq ending down more than 2% after being up 2.6% at its intraday high. Wall Street's fear gauge, the Cboe Volatility index (.VIX), jumped.

Investors have worried about lofty technology valuations amid concerns over steep artificial intelligence spending, with the Nasdaq now sharply off its October high.

In addition, data showed the U.S. unemployment rate rose in September even as employers added more jobs than economists had expected. Traders now see an increasing chance of a Federal Reserve interest rate cut in December.

"I expected the market to be up today just based on the strength of Nvidia's earnings and the recent skepticism about AI investment. Nvidia's earnings obviously dispelled a bunch of those fears," said Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis.

While it is difficult to pinpoint a cause for the market's reversal, he said "we've been in kind of a defensive type of trading action for the last two weeks, so it could be a continuation of that."

The consumer staples sector (.SPLRCS) was the S&P 500's only gainer, while technology (.SPLRCT) was down the most.

According to preliminary data, the S&P 500 (.SPX) lost 103.07 points, or 1.52%, to end at 6,539.09 points, while the Nasdaq Composite (.IXIC) lost 479.64 points, or 2.16%, to 22,084.59. The Dow Jones Industrial Average (.DJI) fell 381.52 points, or 0.83%, to 45,757.25.

Nvidia, the world's most valuable company, forecast sales above analysts' estimates for the fourth quarter and surpassed expectations for third-quarter revenue.

In addition, Nvidia CEO Jensen Huang shrugged off concerns about AI on a call with analysts, saying, "We see something very different."

Among gainers, Walmart (WMT.N) advanced after the retailer raised its annual forecast for the second time this year and set a December date to change its stock listing to the Nasdaq from the NYSE.

Source: Reuters

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Manuel

Political

Stocks

A bipartisan group of U.S. lawmakers introduced a bill on Thursday in the House that would block the purchase of Chinese chipmaking equipment by CHIPS Act grant recipients for ‌10 years.

The bill targets a range of chipmaking tools from complex lithography equipment, like that produced by Dutch manufacturer ‌ASML, to machines that slice and dice the silicon wafers on which chips are printed.

The bill was introduced in the House by Republican Jay Obernolte and Democratic member Zoe Lofgren. In the Senate, Democrat Mark Kelly and Republican Marsha Blackburn plan to introduce the bill in December.

Passed ⁠under the Biden administration in 2022,‌ the CHIPS Act was designed to boost the U.S. chip manufacturing industry and allocated $39 billion to spur the construction of new ‍factories and expand existing facilities.

Chip manufacturers such as Intel, Taiwan's TSMC and South Korea's Samsung Electronics have received grants under the law, though the U.S. later converted Intel's grant money into an equity stake.

China has invested more than $40 billion in the chip industry ‌with a focus on manufacturing equipment, and the market share of such equipment has grown substantially, according to background material provided by the lawmakers.

U.S. chip equipment makers have grown concerned that export restrictions on their tool shipments to China will lower sales and hurt their ability to invest in research and development. The use of CHIPS Act grant money ⁠to buy Chinese equipment has compounded the issue.

The largest American chipmaking tool companies include Applied Materials, Lam Research and KLA.

Though Chinese equipment is the main target of the legislation, the bill also blocks tools from other nations of concern such as Iran, ‍Russia and North Korea.

There are ⁠exceptions carved out in the bill that include the ability for the U.S. to grant waivers if specific tools are not produced in the U.S. ⁠or by its allied countries.

The bill would only block imports to the U.S. and would not affect ‌the foreign operations of CHIPS Act grant recipients.

Source: Reuters

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Russia-Ukraine Conflict

President Volodymyr Zelenskiy said after talks with a top U.S. Army official on Thursday that he was ready to work with Washington on a plan to end the war in Ukraine, and he expects to discuss it with President Donald Trump in coming days.

European countries are pushing back against the U.S.-backed plan, which sources said would require Kyiv to give up more land and partially disarm, conditions long seen by Ukraine's allies as tantamount to capitulation.

Daniel Driscoll in Kyiv that Ukraine and the United States would work together on elements of the plan.

KYIV READY FOR 'CONSTRUCTIVE' WORK

"Our teams -- Ukraine and the USA - will work on the points of the plan to end the war," Zelenskiy wrote on Telegram. "We are ready for constructive, honest and prompt work."

Zelenskiy's office did not comment directly on the content of the 28-point plan, which has not been published, but said the Ukrainian leader had "outlined the fundamental principles that matter to our people".

"In the coming days, the President of Ukraine expects to discuss with President Trump the existing diplomatic opportunities and the key points required to achieve peace," it said.

Trump and Zelenskiy clashed in front of television cameras in a disastrous meeting for the Ukrainian leader at the White House in March, but talks went more smoothly when he visited the White House this summer.

The White House said senior Trump administration officials had met Ukrainian officials in the past week to discuss the plan.

Spokeswoman Karoline Leavitt told reporters that U.S. Secretary of State Marco Rubio and U.S. special envoy Steve Witkoff were involved in the meetings and that Washington was having good conversations with both sides about how to end the war.

GENERAL SAYS RUSSIA CONTROLS KUPIANSK

The acceleration in U.S. diplomacy comes at an awkward time for Kyiv, with its troops on the back foot on the battlefield and Zelenskiy's government undermined by a corruption scandal. Parliament fired two cabinet ministers on Wednesday.

Moscow played down any new U.S. initiative.

"Consultations are not currently under way. There are contacts, of course, but there is no process that could be called consultations," Kremlin spokesman Dmitry Peskov said.

He said Russia had nothing to add beyond the position President Vladimir Putin laid out at a summit with U.S. President Donald Trump in August, adding that any peace deal must address the "root causes of the conflict", a phrase Moscow has long used to refer to its demands.

With another winter approaching in the nearly four-year-old war, Russian troops occupy almost one-fifth of Ukraine and are slowly advancing while bombarding Ukrainian energy supplies and cities as the cold winter sets in.

The Kremlin said on Thursday Putin had visited the command post of the Russian forces' "West" grouping where he met the chief of Russia's general staff, Valery Gerasimov, and other top military brass.

Gerasimov told Putin that Russian forces had taken control of the Ukrainian city of Kupiansk, a city Moscow sees as an important target in its westward push through central and eastern Ukraine. Reuters could not independently verify his statement.

Russian forces are also poised to capture the ruined eastern railway hub of Pokrovsk. Video released by Russia's defence ministry on Thursday showed its troops moving freely through the southern part of Pokrovsk, patrolling deserted streets lined with charred apartment blocks.

'PEACE CANNOT BE CAPITULATION,' SAYS FRANCE

European Union foreign ministers meeting in Brussels did not comment in detail about the U.S. plan, but indicated they would not accept demands for Kyiv to make punishing concessions.

"Ukrainians want peace - a just peace that respects everyone's sovereignty, a durable peace that can't be called into question by future aggression," said French Foreign Minister Jean-Noel Barrot. "But peace cannot be a capitulation."

Rubio said earlier on X that Washington would "continue to develop a list of potential ideas for ending this war based on input from both sides of this conflict".

"Achieving a durable peace will require both sides to agree to difficult but necessary concessions," Rubio said.