Morning Report
Today's economic developments and market movements.
Click here for the full Morning Report (PDF 262KB)
Key themes: US exceptionalism was on full show with the November Global PMIs showing the growth impulse gathered momentum towards the end of the year, while inflationary pressures continue to dissipate. The increased prospect of no, or a very soft, economic landing kicked off a rally in equities which saw the Dow Jones reach a record high.
The US yield curve was flatter last week. Yields were generally lower across Europe with subpar economic data increasing the likelihood of a 50-basis point cut when the ECB meets in mid-December.
The king US dollar continued it relentless climb, with the US dollar index rising above 108.0 for the first time in more than two years. The RBA inspired resilience saw the Aussie finish the week higher, even though it gave up some ground against the Greenback on Friday.
Share markets: Stronger than expected earnings reports from retailers (including Gap Inc, Elastic NV and Ross Stores), along with the increased prospect of no, or a very soft, economic landing kicked off a rally in equities which saw the Dow Jones reach a fresh record high. The S&P Global flash index showed growth momentum in the US is at its strongest in more than two years, while price pressures continued to dissipate. Small caps benefit the most from this solid economic reading.
The S&P 500 Index rose 0.4%, with eight of the eleven sectors finishing the green, led by industrials and consumer discretionary. The benchmark gained 1.7% for the week. The tech-heavy Nasdaq added 0.2% to also finish the week 1.7% higher. The Dow Jones closed 1.0% higher to close at a fresh record high, advancing 2.0% over the week.
European stocks also rose for a second consecutive day, brushing off weak retail trade data coming out of the UK to finish the session higher. The Euro Stoxx 50 closed 0.7% higher but was flat over the week. The DAX was 0.9% higher and finished the week 0.6% higher. The FTSE 100 finished 1.4% to be 2.6% higher in weekly terms.
The ASX200 index rose 0.9% to close at a fresh record high of 8,393.80. Ten of the eleven sectors finished higher, led by gains in banking and mining stocks. The benchmark advanced 1.3% over the week. Futures are pointing to a solid open this morning.
Interest rates: The US yield curve flattened on Friday. The US 2-year bond yield increased 3 basis points to 4.37% after falling to 4.32% during the session. The 2-year bond yield finished the week 7 basis points higher. The US 10-year bond yield declined 2 basis point to 4.40%, finishing the week 4 basis points lower.
Money markets remain divided on the chances of a Fed cut in December, ascribing a 50% chance to the Fed easing further in its next meeting. Markest are pricing in around 65 basis points of cuts by the end of 2025.
Yields were lower across Europe, with 10-year bond yields down 8 basis points to 2.24% in Germany and down 6 basis points to 4.39% in the UK.
The yield curve in Australia shifted lower. The 3-year futures yield declined 1 basis point to 4.07%, while the 10-year futures yield declined 2 basis points to 4.54%. The first full rate cut is expected by July 2025, with around 49 basis points of cuts expected over 2025.
Foreign exchange: The king US dollar continued it relentless climb, with the US dollar index rising above 108.0 for the first time in more than two years. The US dollar index was 0.5% higher at 107.55, after reaching an intraday high of 108.071 – highest level since November 2022. Strong relative economic performance in the US, coupled with growing geopolitical tensions, suggests further upside for the king dollar.
The Aussie recovered most of the losses recorded in early trade to bounce back near 0.6500. The AUD/USD pair traded within the range 0.6472 to 0.6521 after enjoying some RBA inspired resilience during the week. Despite the strong US dollar, the AUD/USD pair finished the week 0.6% higher. In the near term the Aussie remains susceptible given the rise of the Greenback. However, potential for ongoing China stimulus and the RBA’s continued hawkish guidance is likely to provide the Aussie with support.
The euro continued to slide, down 0.5% to 1.0418 after reaching its lowest level (1.0335) since November 2022. The euro is now eyeing further falls after weak PMI reads increased the likelihood of a 50-basis point cut when the ECB meets in December. Money markets have priced in 38 basis point of cuts for December. As we have been saying, downside risk remains given political uncertainty in Europe and the bloc’s relative economic under performance as shown in Friday’s PMIs.
The Pound also continued to slide, on the back of weak retail data which has increased the chances of another cut when the BoE meets on 19 December. The Pound declined to a low of 1.2487 in intraday trade – the lowest in May. The Pound has fallen by more than 6% over the past two months.
The Japanese Yen declined, with the USD/JPY increasing 0.2% to 154.91 on the back of the stronger US dollar. Recent comments from Governor Ueda bolster expectations of a hike in December, with money markers pricing in around 15bps of hikes in December, despite the benign inflation read for October.
Commodities: Oil markets rose again on rising geopolitical risk. The market is also looking to the OPEC+ December meeting where the group will decide whether to extend output cuts into next year. The West Texas Intermediate (WTI) is trading 1.6% higher at US$71.24 per barrel, while Brent gained 1.3% to US$75.17 per barrel.
Industrial metals eased further with copper down 0.4% to $8,885 a metric ton and aluminium also down 0.4% to $2,621.50 a ton. The surge in the US dollar has increased the cost of purchasing dollar-denominated commodities like copper.
Iron ore remained above USD100 a tonne as traders focused on lower steel product inventory in China driven by robust exports.
Australia: The S&P Global flash November composite index declined to 49.4pts in November, from 50.2pts in October. The services index fell to contractionary territory for the first time since January this year, while manufacturing improved but remained in contractionary zone. Input prices rose at the slowest pace in just over four years. The rate of output price inflation was also the softest in nearly four years.
United States: The S&P Global flash November composite index jumped to 55.3pts in November, from 54.1pts last month. This was the highest read in more than 2 and a half years. The outcome was driven by the services sector, but manufacturers were the most upbeat about production over the coming year since April 2022.
The composite measure of future output advanced 1.6pts to the highest level since May 2022, building on October’s 6.4pt increase. The composite index of prices slid to a more than four-year low of 50.8pts this month, while the index for services prices dropped to the lowest level since May 2020.
The University of Michigan consumer sentiment was revised lower to 71.8pts in November from a preliminary estimate of 73pts. The index remained at its highest read in seven months. The expectations index was revised to 63.9pts from 64.4pts. Inflation expectations for the year-ahead were unchanged at 2.6% while the five-year outlook increased by 0.1ppts to 3.2% compared with the preliminary read.
Eurozone: The composite PMI fell to 48.1pts in November from 50pts in October. This was worse than the 50pts expected by the market. The PMIs show that weakness in the service sector is magnifying the impact of a deeper contraction for manufacturers.
United Kingdom: The GfK Consumer Confidence index jumped 3pts to -18 in November. This was better than the deterioration to -22pts expected by the market and was the first improvement in three months. Consumer willingness to make big-ticket purchases increased 5pts, which could signal higher spending during the holiday season. This gain comes amid lower interest rates, rising wages, and reduced concerns about tax hikes.
Retail sales declined 0.7% in October, following a 0.1% rise in September. This was worse than the fall on 0.4% expected by the market. Sales in non-food stores fell 1.4% in October, following a rise of 2.3% in September. Online sales contracted 1.2% in October. In annual terms, retail sales rose 2.4%, below the 3.4% expected by the market.
The composite PMI fell to 49.9pts in November, from 51.8pts in October. This was well below the 51.8pts the market was expecting and was the first sub 50 read in one year. The unexpected contraction was in line with lower economic activity across major economies in Europe. The lower momentum was more pronounced for manufacturers, although service providers also recorded a step down in activity.
Japan: The annual inflation rate edged lower to 2.3%yr in October from 2.5%yr in September. Electricity prices saw the smallest increase in six months and the increase in gas pieces moderated. There was deflation for communication and education. Inflation edged higher for food and housing. Core inflation hit a six-month low of 2.3%yr, down from the 2.4%yr recorded in September. In monthly terms, inflation increased 0.4%mth in October, reversing the fall of -0.3%mth in September.
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Morning Report
Morning Report
Morning Report
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.