Manufacturing lags in flash December data for the Eurozone, UK and US

Provisional Purchasing Managers’ Index (PMI) survey data for December showed that the Eurozone private sector ended the year still in contraction as business activity decreased for the second month running. At 49.5, however, the latest reading of the HCOB Flash Eurozone Composite PMI Output Index was up from 48.3 in November, pointing to a softer and only marginal fall in output.

A marked reduction in output in the manufacturing sector just outweighed a renewed increase in the much larger service sector. December saw services activity rise modestly, following a slight fall in November, with the pace of growth similar to those seen in September and October. Manufacturing production, meanwhile, decreased to the largest extent since the corresponding month last year.

Companies in the Eurozone continued to face challenges securing new orders in December. New business decreased for the seventh consecutive month, with falls recorded in both manufacturing and services. The rate of contraction was solid, albeit weaker than in November. New export orders (which include intra-Eurozone trade) fell again, and even more quickly than total new business.

In the UK, December data pointed to another marginal increase in private sector output. The headline seasonally adjusted S&P Global Flash UK PMI Composite Output Index posted 50.5 in December. This was unchanged from November’s 13-month low and signalled only a marginal expansion of private sector output. Moreover, the rate of business activity expansion remained much weaker than seen in the first half of the year (average index reading of 53.0).

Divergent trends were recorded in the UK’s manufacturing and service sectors in December. The former posted a second consecutive monthly reduction in production volumes (index at 45.7), with the rate of decline accelerating to its fastest since January. In contrast, the latest survey indicated a modest rise in service sector output (51.4) and the rate of growth picked up slightly from November’s 13-month low.

Across the pond, the headline S&P Global Flash US PMI Composite Output Index rose from 54.9 in November to 56.6 in December, signalling the fastest expansion of business activity since March 2022. The PMI has now recorded continual growth since February 2023, with especially robust growth recorded over the second half of 2024. Activity levels were expanded at an increased rate in December in response to strengthening demand. New orders rose at the sharpest rate since April 2022.

Growth was once again uneven across the economy; however, there was a further surge in service sector activity – which rose at a rate not seen since October 2021 – contrasting with the steepest fall in manufacturing production since May 2020. If pandemic months are excluded, the latest service sector expansion was the strongest recorded since March 2015, while the latest manufacturing downturn was the sharpest since the global financial crisis in August 2009.

 

Huge growth in highly personalised GenAI-driven fraud attacks

Experian’s 2024 Global Identity & Fraud Report has cast a spotlight on three factors driving the fast-evolving fraud landscape: the huge growth in GenAI technologies, changing government regulations, and the push among businesses to provide consumers with secure and convenient digital experiences. In response to these factors, the report’s findings revealed that businesses intend to increase fraud budgets driven by investments in AI and machine learning technologies.

“Unlike other issues facing financial services companies, fraud operates beyond geographical boundaries or regulatory frameworks, and fraudsters often attack different points across the consumer journey,” said Greg Wright, Executive Vice President of Identity and Fraud at Experian. “This unfortunate reality compels businesses to leverage advanced analytics, alternative data insights, data sharing, and a multi-layered approach to combat evolving fraud threats globally.”

On the consumer side, report data indicates that striking the right balance between fraud protection and a positive customer experience is critically important due to the high percentage of global consumers who stated that they have moved their business elsewhere due to a poor account opening or slow transactional experience.

These findings underscore that businesses worldwide face the same challenge: authenticating customers requires balancing security with a seamless customer experience to prevent them from abandoning an application or purchase process. The report says the solution is to leverage analytics and orchestrate fraud-prevention routines for a 360‑degree view of customers, mitigating fraud and offering a seamless customer experience.

 

Bond default rates will remain low for Chinese corporate issuers

Default rates for Chinese corporate bond issuers are likely to remain low in the next 12 months, both onshore and offshore, following declines in 2023. This is according to a recent report from ratings agency Moody’s. 

Many financially weak property developers have already defaulted in the past few years, although refinancing risks from their outstanding bonds remain high. Government support measures for state-owned enterprises (SOEs), including local government financing vehicles (LGFVs), have reduced their default risks and improved domestic funding access for many of them.

Corporate bond default rates will remain low, thanks to government support measures for LGFVs. The issuer-weighted default rate for Chinese corporate bonds declined to 0.11% in 2023 from 0.16% in the prior year onshore and to 1.22% from 6.85% offshore. Moody’s expects default rates to remain low in the coming 12 months. Even though weaknesses among property developers and LGFVs persist, most distressed companies in the former issuer group have already defaulted or have started undergoing debt restructuring. As for the latter, government measures to support LGFVs implemented in the second half of 2023 have not only alleviated refinancing and default risks for these borrowers, particularly those in weaker regions but also led to an easing of funding access for the sector in general. Apart from property developers and LGFVs, no other groups of corporate bond issuers are posing systemic risks that can trigger a notable surge in defaults in the near term.

Privately owned developers will remain vulnerable, while LGFVs will benefit from the large scale of a new debt swap programme. Privately owned property developers will remain vulnerable as they have large amounts of bonds maturing in the next 12 months. With regards to LGFVs, a new RMB10 trillion government swap program that will be in place until 2028 will help alleviate refinancing risks for them, although their long-term debt sustainability has not yet been materially improved, the report notes.

Maturity extensions by distressed companies – which are often defaults according to Moody’s definition – can buy time for property developers, but refinancing risks still persist. Liquidity and refinancing risks for financially weak developers will remain high even after maturity extensions, especially for those whose extended maturities fall in 2024-25, when these issuers' liquidity will remain constrained by limited funding access and weak property sales.

 

BNP Paribas outlines role in Eurosystem trials of wholesale DLT trials

BNP Paribas has described its role in testing all three solutions in the Eurosystem’s wholesale digital settlement trials. By engaging in real and test transactions with Banque de France, Deutsche Bundesbank, and Banca d’Italia, the French bank utilised its Neobonds and AssetFoundry platforms to push the boundaries of digital asset technology. This initiative is set to deepen insights into the interaction between Eurosystem payment infrastructures and market DLT platforms, playing a crucial role in modernising European markets, developing the economy and bolstering financial stability.

As part of this experimentation programme, BNP Paribas tested the three available solutions via ten use cases, conducting real transactions with Neobonds, its private tokenisation platform leveraging Canton blockchain, and test transactions with AssetFoundry, its Ethereum-based platform. It also performed tests with external DLT platforms.

BNP Paribas was market DLT participant and market DLT operator, leveraging its integrated and diversified model across business lines, including ALM Treasury, BNP Paribas Asset Management, FIC Official Institutions Coverage/FIC Investors Coverage, Global Markets, and Securities Services, to build expertise across multiple roles, along with other market participants, both issuers and investors.

As part of the programme, BNP Paribas arranged and placed the first Eurozone sovereign digital bond for the Republic of Slovenia as DLT market operator on the Neobonds platform. This €30m issuance was followed by secondary market activity with investors AXA IM – on behalf of AXA France, Banque de France and the European Investment Bank (EIB).

BNP Paribas was joint lead manager of the European Investment Bank’s €100m three-year euro digital bond issuance. The bond was registered and settled on HSBC’s ORION platform. Similarly, Caisse des Dépôts issued its first digitally native notes on Euroclear’s tokenisation platform (D-FMI) where BNP Paribas acted as issuing and paying agent.

Additionally, BNP Paribas participated in a trial for the subscription of tokenised fund shares, managing the wallets and cash flows of the investor and fund house.

The bank also tested Deutsche Bundesbank’s Trigger solution for the cash settlement of a BNP Paribas bond, issued and settled on the Neobonds platform as market DLT operator. Issuance was followed by secondary market transactions. An experiment was also performed using the AssetFoundry platform.

BNP Paribas conducted thorough testing of Banca d’Italia’s Hash-Link solution with the issuance and settlement of a simulated bond. This solution relies on a dedicated instance of TARGET Instant Payment Settlement (TIPS) and on an API-based lightweight protocol (Hash Link); and the bank says that all its functionalities were explored with success.

 

Accounting Seed series to explore data and automation opportunities for SMEs 

Accounting Seed, an accounting solution built on the Salesforce platform, has released a series of guides designed to give businesses the tools and strategies needed to meet growing customer demands by leveraging technology to achieve growth goals without adding headcount. 

This series follows product announcements from the company, including the launch of the AP Automation and AR Automation tools.

Highlighting the importance of data accuracy and accounting automation, these resources address the challenges businesses face while offering practical solutions to streamline processes and improve outcomes. The series includes:

1. Data Accuracy: The company says this guide delivers actionable insights into improving data integrity and minimising errors while also exploring the role of connected systems and automation.
2. AR Automation: This guide highlights how automating accounts receivable accelerates payments and eliminates errors. It provides strategies for improving cash flow and building stronger customer relationships.
3. AP Automation: This guide explains how automating accounts payable saves time and improves vendor relations. It offers a roadmap for transitioning to automated AP processes.

“Today’s growing businesses are navigating a rapidly evolving financial landscape,” said Pete Lambert, CFO at Accounting Seed. “These guides offer practical advice and tools to help leaders achieve greater efficiency, accuracy and strategic advantage by embracing modern accounting automation - especially with the evolution of AI.”