US Manufacturing Stuck in Doldrums as Tariff Headwinds Persist

Economic

Summary:

The Republican president has issued some tariff relief since then on parts and ‌engines. A new 25% duty on imported medium- and heavy-duty trucks and parts came into effect on November 1.

U.S. manufacturing contracted for the ninth straight month in November, with factories facing slumping orders and higher prices for inputs as the drag from import tariffs persisted.

The Institute for Supply Management survey on Monday also showed some manufacturers in the transportation equipment industry linking layoffs to President Donald Trump's sweeping duties, saying they were "starting to institute more permanent changes due to the tariff environment." They added "this includes reduction of staff, new guidance to shareholders and development of additional offshore manufacturing that would have otherwise been ‌for U.S. export."

Trump in May imposed 25% tariffs on more than $460 billion worth of imports of vehicles and auto parts annually, but has since struck deals to reduce those tariffs on some countries. The Republican president has issued some tariff relief since then on parts and ‌engines. A new 25% duty on imported medium- and heavy-duty trucks and parts came into effect on November 1.

"The manufacturing sector continues to be weighed down by the unpredictable tariffs landscape," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

The ISM said its manufacturing PMI dropped to 48.2 last month from 48.7 in October. A reading below 50 indicates contraction in manufacturing, which accounts for 10.1% of the economy. With some manufacturers citing the recently ended U.S. government shutdown, a slight improvement is likely, though factory activity will probably remain subdued.

Import duties have undercut manufacturing, though some segments have been boosted by a surge in artificial intelligence investment. The Federal ⁠Reserve's Beige Book report last week said some of the U.S. central ‌bank's 12 districts reported manufacturing activity increased somewhat, but noted "tariffs and tariff uncertainty remained a headwind."

Only four industries in the ISM survey, including computer and electronic products, and machinery reported growth. Among the industries that contracted were wood products, transportation equipment and textile mills.

Some makers of chemical products said "tariffs and economic uncertainty continue to weigh on ‍demand for adhesives and sealants, which are primarily used in building construction." Manufacturers of miscellaneous goods reported that "business conditions remain soft as a result of higher costs from tariffs, the government shutdown, and increased global uncertainty."

Electrical equipment, appliances and components makers complained about "trade confusion," with others noting that "suppliers are finding more and more errors when attempting to export to the U.S." Some manufacturers of wood products said AI was "producing confusing and most often inaccurate information," adding that "this also causes apprehensive consumer buying patterns, contributing to the challenge of forecasting demand."

The cloud of uncertainty from tariffs is unlikely to clear soon. U.S. Supreme Court justices last month raised doubts over ‌the legality of Trump's tariffs, fueling speculation they would be struck down and cause more chaos, as he is widely expected to shift to other trade tactics in the event of an adverse ruling.

'THE MANUFACTURING SECTOR IS SICK'

Trump has defended the tariffs as necessary to protect domestic manufacturing, though economists have argued it is impossible to restore the industry to its former glory because of structural issues, including worker shortages.

"We can see no sign in this report of a surge in manufacturing in the United States since the tariff regime was unveiled last spring," said Carl Weinberg, chief economist at High Frequency Economics. "The manufacturing sector is sick."

The ISM survey's forward-looking new orders sub-index decreased to 47.4 last month from 49.4 in October. This measure has contracted in nine of the last 10 months. Tariffs have raised prices for some goods, curbing demand. Unfilled orders continued to shrink, though exports improved slightly.

Weak ⁠demand meant less pressure on supply chains, though some machinery manufacturers said "transit time on imports seems to be longer" and their counterparts in the fabricated metal products industry reported "longer lead times" because they reduced "suppliers for raw materials to maintain a better direct cost structure."

The ISM survey's supplier deliveries index fell to 49.3 from 54.2 in October. A reading below 50 indicates faster deliveries.

Despite subdued orders for factory goods, manufacturers paid more for inputs last month, a sign that inflation could remain above the Fed's 2% target for a while. The survey's prices-paid measure increased to 58.5 from 58.‍0 in the prior month.

"This flags ongoing upside risks to ⁠goods prices," said Oren Klachkin, financial market economist at Nationwide. "We see inflation firming a little bit through early next year and losing steam after the impacts of tariffs pass through the data."

Fed officials will meet next week to decide on interest rates. As many as five of the 12 voting policymakers on the central bank's rate-setting Federal Open Market Committee have voiced opposition to or skepticism about cutting rates ⁠further, while a core of three members of the Washington-based Board of Governors wants rates to fall.

The survey's measure of manufacturing employment contracted for the 10th consecutive month. Susan Spence, chair of ISM's Manufacturing Business Survey Committee, noted that "67% of panelists indicated ‌that managing head counts is still the norm at their companies, as opposed to hiring."

"That is not a terribly encouraging signal for blue-collar workers at what is a difficult time for ‌employment prospects," said Shannon Grein, an economist at Wells Fargo.

Source: Reuters

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Justin

Commodity

Gold prices are modestly higher in midday U.S. trading Monday and hit a six-week high. Silver is on a tear and hit another record high. Some safe-haven demand for gold and silver is featured to start the trading week and the new month, amid bond market jitters that have originated from Japan. Chart-based buying is also featured in both metals as their near-term technical postures have become more bullish recently. February gold was last up $14.10 at $4,270.20. March silver prices were up $2.012 at $59.22 and hitting a contract/record high of $59.30 and climbing as of this writing.

Global stock markets were mostly weaker overnight. U.S. stock indexes are weaker near midday but up from session lows. There are some worries about Japan's bond market that have traders and investors a bit jittery to start the week.

President Trump on Sunday said he has decided on his pick for the next Federal Reserve chair and expects his nominee to deliver interest-rate cuts. Trump's chief economic adviser, Kevin Hassett, is seen as the likely choice to succeed current Fed chief Jerome Powell, according to people familiar with the matter and as reported by Bloomberg. The person Trump picks will require U.S. Senate confirmation as chair and likely to a 14-year Fed governor term that begins in February if the selection is an outsider. Powell's term ends in May. Hassett as the new Fed chair would be price-friendly for the precious metals.

The key outside markets today see the U.S. dollar index lower. Crude oil prices are firmer and trading around $59.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.1%.

Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.

Technically, February gold futures bulls' next upside price objective is to produce a close above solid resistance at the contract/record high of $4,433.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,000.00. First resistance is seen at $4,300.00 and then at $4,350.00. First support is seen at the overnight low of $4,241.10 and then at $4,200.00. Wyckoff's Market Rating: 8.0.

March silver futures bulls have the strong overall near-term technical advantage. Their next upside price objective is closing prices above solid technical resistance at $60.00. The next downside price objective for the bears is closing prices below solid support at $52.50. First resistance is seen at $60.00 and then at $61.00. Next support is seen at the overnight low of $56.85 and then at $56.00. Wyckoff's Market Rating: 9.5.

Source: Kitco

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Devin

Central Bank

Federal Reserve bank supervisors are monitoring community and regional banks' commercial real estate portfolios amid concerns over "elevated interest rates, tighter underwriting standards, and lower commercial property values," the agency said.

The central bank said those factors may affect borrowers' ability to refinance or pay off their loans, according to a supervision and regulation report released Monday. Officials are monitoring commercial real estate loan trends in addition to closely reviewing underwriting practices and credit loss reserve levels.

Among Wall Street lenders, the agency's watchdogs are monitoring for weaknesses in capital planning and liquidity risk-management practices among such lenders. Still, the Fed report found that the vast majority of banks continued to report capital levels well above applicable regulatory requirements as of the second quarter.

"Stress test results showed that large banks are well positioned to weather a severe recession while maintaining minimum capital requirements and the ability to lend to households and businesses," according to the report.

These areas of focus come as Fed Vice Chair for Supervision Michelle Bowman has urged supervisors to shift their focus to material risks rather than become distracted by process-related items that do not impact a firm's safety and soundness.

US regulators have recently moved to ease several capital requirements and finalized changes last month to its supervisory rating framework for large banks.

Source: Bloomberg Europe

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Golden Gleam

Commodity

Economic

Gold prices rose to a six-week high on Monday, supported by growing expectations of U.S. interest rate cuts and a sliding dollar, while silver struck a record high ahead of key U.S. economic data.

Spot gold was up 0.3% at $4,244.29 per ounce, as of 09:21 AM ET (1421 GMT), its highest since October 21. U.S. gold futures for February delivery gained 0.6% to $4,278.40.Silver was up 1.8% to $57.39 per ounce, after hitting an all-time high of $57.86 earlier.

The U.S. dollar slipped to a two-week low, making gold more affordable for holders of other currencies.

"The underlying environment of expectations of further rate cuts, along with inflationary pressure still above the Fed target... is still the underlying support in gold and silver," said David Meger, director of metals trading at High Ridge Futures.

Traders have increased December rate-cut bets to an 87% probability, following softer U.S. economic data and dovish remarks from Fed officials, including Governor Christopher Waller and New York Fed President John Williams.

Lower interest rates tend to favor non-yielding assets such as gold.

Investors are also focusing on key U.S. data this week, including November ADP employment figures on Wednesday and the delayed September Personal Consumption Expenditures (PCE) Index, the Fed's preferred inflation gauge, due Friday.

Fed Chair Jerome Powell's remarks later on Monday are also expected to offer further policy clues.

Meanwhile, the expectation that the next Fed Chair is going to be more dovish than previous ones is also supporting gold and silver, Meger said.

White House economic adviser Kevin Hassett said on Sunday that, if chosen, he would be happy to serve as the next Fed chairman. Treasury Secretary Scott Bessent indicated a new chair could be named before Christmas.

"We still view gold and silver in a strong sideways to higher uptrend," Meger said.

Among other precious metals, platinu rose 0.3% to $1,677.28, while palladium fell 0.5% to $1,443.75.

Source: Kitco

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Adam

Economic

The appetite for downturns rests on a mix of emotions, media reflexes and attention (and money) gains for those who make a living from financial commentary. This cocktail explains why a red day always draws more attention than a calm, or even not-so-calm, upswing.

Falls always make for a better story. There is tension, drama, culprits, victims. Nobody is interested in a 0.7% gain, while a 5% loss mobilizes everyone. The media know it: red alerts trigger clicks. This is not a conspiracy, it is biology. Kahneman and Tversky theorized this brutal asymmetry: the pain of losing €1,000 is psychologically twice as intense as the pleasure of winning the same amount. Our reptilian brain is wired for survival, not serenity. A green arrow is information, a red arrow is a life-threatening danger. Threats always take priority. And fear sells, and not just shares.

Sell everything

A bull market reassures, a bear market worries, and therefore engages. When indices plunge, news channels see their audiences surge, analysts are listened to more closely, experts are in higher demand, defensive products are bought in greater numbers. On MarketScreener, in-depth analysis pieces are read far more. With aggressive headlines, their audience can even multiply tenfold. "The market is falling" works well. But less well than "The stock market is collapsing". Which is less effective than "Huge stockmarket crash on Wall Street" or "Sell everything, the market is going to lose 50%". A downturn is a moment of frantic consumption of content, advice, opinions. Everyone has something to say. Especially those who have been calling for a meltdown for years.

Because every correction becomes an opportunity to replay the crash prediction. Some people are just waiting for that: for the market to finally tumble so they can say "I told you so". They make a lot of noise when markets fall, then disappear during the recovery phases. Their narrative survives only in moments of urgency and delivers catastrophic results over the long term.

I remember a panel discussion a few years ago. On my right sat an economist known for having started out in investment banking before making his money out of catastrophism (yes, that one). It is still his bread and butter today, thanks to a community whose size has mysteriously swelled over the years. Back then, already known for predicting all sorts of looming cataclysms, he boasted that he had avoided losing money for those who listened to him. A fund manager sitting opposite him, whose name I have forgotten, replied icily: "By encouraging them to stay out of the market for 15 years, sir, you have mostly cost them a lot of money."

A healthy dose of Schadenfreude

We also have to admit that many of those who revel in a downturn don(t have a penny in the market. Their relationship with the market is ideological or purely about spectacle. They see finance as an opaque, unfair or simply distant system. For them, a stockmarket decline is like a disaster movie: a show, not a loss. It is even a form of revenge against a world they do not belong to. There is, in this voyeurism, a dose of Schadenfreude, that guilty pleasure at other people's misfortune. When the market rises, the rich get richer and inequalities widen. When it collapses, everything is levelled. Watching "those at the top" panic provides a sense of rough justice, a kind of egalitarianism by way of emptiness. For the spectator, the crash is not a financial loss, it is a moral reward.

Finally, fear is contagious. During sell-offs, even outsiders are glued to the screens. Humans are wired to react to danger, and the media know how to play on this archaic reflex. It is also a platform for players who gain little from rising markets. It offers a window to short-sellers, crisis commentators, political parties predicting systemic collapse, or those who want to prove that "finance does not work".

This is not rational, it is human. That is why markets in the red always make more noise than those in the green.

Source: marketscreener

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Adam

Stocks

Fund managers are picking Chinese industrial stocks and holding volatile tech shares, betting a two-year-old equities rally can withstand an economic rough patch, as valuations and steady returns lure foreign investors back.

China's blue-chip index CSI300 <.CSI300> has matched the S&P 500 (.SPX) with a roughly 16% year-to-date gain, while Hong Kong's Hang Seng (.HSI) - up about 30% - is on course for its most substantial annual rise since 2017. The mood is far from the stimulus-triggered euphoria of a year ago, though the ride is becoming bumpier - especially as pressure on developer China Vanke (000002.SZ) reminds market participants that a prolonged property downturn is far from over.

But there seems to be little panic among investors and analysts who say the bull market is just taking a breather.

"We believe we are just at the beginning of a gradual reallocation process by foreign investors coming back into China," said Morgan Stanley's chief China equity strategist Laura Wang.

"I think what they have seen so far through the course of this year has already been encouraging enough for them to gradually change their mind," she said, adding that she had been spending less time talking with investors about U.S.-China tensions.

China stocks have also defied Sino-American trade friction and climbed thanks to state support, improved corporate governance and big gains for artificial-intelligence-linked stocks after the impressive release of DeepSeek's chatbot.

A record HK$1.38 trillion ($177 billion) was also poured from China into Hong Kong, where capital markets have been revived.

"The next leg of the bull run will likely be driven by fundamental improvements and earnings growth," said Xia Fengguang, fund manager at Shenzhen Rongzhi Investment.

Like others, he is supportive of Beijing's campaign against industrial overcapacity and price wars, referred to as its anti-involution drive, betting it can improve corporate margins.

ANTI-INVOLUTION

Valuations of industrial stocks are also attractive, fund managers say, and they are helping to draw investment.

"Cyclical stocks are relatively cheap, so you can start building positions when prices are weak as anti-involution policies gradually take root," fund manager Wang An said.

Over the past three months, 13.5 billion yuan ($1.91 billion) in net inflows entered ETFs tracking the CSI Battery Thematic Index , while another 11.2 billion yuan went into funds tracking the CSI chemicals sub-industry index (000813.SZ) , according to financial data provider Datayes.

Funds tracking the tech-heavy STAR 50 Index (000688.SZ) experienced 31.1 billion yuan of net outflows during the same period.

Xu Jie, a Shanghai-based fund manager at Yuanzi Investment Management, has bought solar energy, steel-making and coal stocks.

"There is no question" that China's slow bull run will extend into next year, Xu said, citing potential inflows from foreigners and local depositors.

Currently, the Shanghai Composite Index (.SSEC) and Hong Kong's Hang Seng are both trading at roughly 12 times earnings.

That compares with a multiple of 28 for the S&P 500 (.SPX) , 21 for Japan's Nikkei 225 (.N225), and a price-to-earnings ratio of 21 for Europe's FTSE 100 Index (.FTSE) according to LSEG.

"Whether you look at valuation or liquidity, we are just halfway through the bull run," said Wang Wendi, distribution manager at Shanghai Intewise Capital, which has increased its holdings in steelmakers, chemical producers and express-delivery firms.

Another Chinese fund house, Zenith & Xenium Capital, said it also placed wagers on cyclical plays like photovoltaic firms, refiners and chemical processors and new energy sectors.

NEW CHINA

Foreigners have previously held concerns over policy risks in China and for the past few years have kept allocations relatively light while U.S. and global investments have performed strongly.

Some investors said they were not all in on China and, as factory activity slowed for an eighth straight month in October, there are headwinds.

"When I say China, we're on the fence," said Vincenzo Vedda, global chief investment officer at DWS.

China no longer publishes real-time data on foreign inflows and the latest central bank figures showed foreign holdings rose to 3.5 trillion yuan at the end of September, well below a 2021 peak of 3.9 trillion yuan, but it reflected some strength.

Florian Neto, head of investment for Asia at Amundi, Europe's biggest asset manager, is neutral but draws a distinction between the "old China," where exporters and developers faced economic headwinds and "new China" where AI and biotech firms can expect earnings growth.

"The market, in fact, is actually driven mostly by new China, by the innovation, tech and innovative drugs ... we are very, very much looking forward to adding further," he said.

And as investors take note of their full-year returns, they may become buyers in 2026.

"A number of other stock markets have performed better than the U.S. this year," said Kristina Hooper, chief market strategist at Man Group in New York.

"And that is, I think, a paradigm shift that most investors will recognise at least by January ... and I think that helps encourage looking outside the U.S. for opportunities, especially with valuations so stretched."

($1 = 7.0744 Chinese yuan renminbi)

($1 = 7.7874 Hong Kong dollars)

Source: reuters

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Adam

Forex

Stocks

India’s Nifty 50 index and its currency appeared to move in lockstep on Monday, weighing down a stock gauge that touched an intra-day record during morning trading.

The benchmark was up as much as 0.5% after the open, putting it on course to close at an all-time high. But the Indian rupee had its own record to set, plunging to yet another low — and the stock market went down with it. The Nifty 50 was roughly flat in afternoon trading, and remains up around 11% so far this year.

Rupee Selloff Weighs on Nifty 50 After Index Briefly Hits Record_1

The pair has witnessed similar movement in recent sessions, when the rupee’s fall against the dollar worsened. Market participants aren’t sure what’s driving the tight move, but they said a sense of uncertainty in the market is hitting both stocks and the currency.

“Equities are already trading close to all-time highs and sharp movement in the rupee is making some investors jittery,” said Abhishek Shah, a Mumbai-based proprietary trader. Shah also mentioned that lack of any communication on a tariff deal with the US is weighing on market sentiment.

There can be a feedback loop between a country’s currency and its stock market, although the correlation between the two is often unpredictable. For example, foreigners selling Indian stocks put pressure on the rupee, which could in turn encourage other foreigners to sell before the currency tumbles further.

Foreigners bought a net $430 million of Indian stocks in November, a big drop from the $1.2 billion they purchased in October, according to Bloomberg-compiled data. Data for foreigners’ net purchases on Monday isn’t yet available.