There is plenty of data out today and it is generally reinforcing our three many thematic points:  divergence, weak commodities, especially energy, and the slowing of the Chinese economy. This is helping the US dollar and global bonds, but weighing on equities.  

HSBC’s flash manufacturing PMI for China slipped to 50.0 from 50.4. It is a six-month low. The output sub-index fell below 50 for the first time since May.  

The flash eurozone November composite PMI fell to 51.4 from 52.1. This is the lowest since July 2013. The disappointing data can only play up expectations that the ECB staff will cut its forecasts next month, setting the stage for the ECB to expand the assets it is purchasing.  

Any hope that the ZEW survey for German presaged a recovery for the European locomotive were dashed with the PMI reports today. Manufacturing slumped to 505 from 51.8 and services fell to 52.1 from 54.8.  While the French readings improved, both remain in contraction mode. That said, recall that the French economy did expand 0.3% in Q3 (Germany 0.1%). French manufacturing PMI rose to 47.6 from 47.3 and services rose to 48.8 from 48.1  

The UK offered a positive surprise.  October retail sales jumped 0.8%, which is more than twice the gain the consensus expected (0.3%).  It completely offsets the 0.4% decline in September retail sales. The year-over-year rates stands at a respectable 4.3%, up from 2.3% in September.  The cloud in the silver lining is price deflator, which fell in every category for the first time in over a decade. Even though CPI ticked up in October, the disinflation risks, as highlighted by the BOE’s Quarterly Inflation Report, will dominate price trends in the coming months.  

Following the FOMC minutes yesterday, the dollar pushed through the JPY118 level. It stretched to almost JPY119 before some profit-taking was seen.  Look for support near JPY118 now.  Japan did report a smaller than expected trade deficit for October. The shortfall was JPY710 bln. The market had expected deterioration to JPY1.2 trillion from JPY961 bln in September.