BoJ Amamiya: Will extend the duration of COVID-response measures if needed

    BoJ Deputy Governor Masayoshi Amamiya said the current “powerful easing” is exerting an “intended effect” on the economy. Private consumption was gradually picking up, and likely to continue recovery. However, he expected corporate finance to remain under stress as “economic improvement to be moderate”.

    “The BOJ will closely watch the impact of COVID-19 for the time being and take additional easing steps without hesitation as needed,” he added. “Will extend the duration of COVID-response measures beyond March deadline as needed, with an eye on pandemic impact on economy.”

    Fed Daly assuming a slow grinding recovery persists

      San Francisco Fed President Mary Daly said she’s assuming “a slow grinding recovery persists until we have the virus fully behind us. And that’s “predicated on a vaccine that is widely available and distributed.”

      At the same time, monetary policy is “in a good place”. “It is not the time to stimulate the economy aggressively and get people out in the economy because that would be unsafe,” she added.

      “We are thinking hard about what does the economy need and … when can we shift gears mentally… from building a bridge to actually trying to stimulate the economy into a strong recovery,” she said. “And we are not there yet.”

      Fed Powell: Difficult to assess economic implications of coronavirus vaccines

        In the testimony before a Senate Committee, Fed Chair Jerome Powell warned “the rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months.” And, “a full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.

        New on vaccine is “very positive for the medium term”. But “significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups”. Hence, remains “difficult” to assess the timing and scope of respective economic implications.

        Full remarks here.

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        US ISM manufacturing dropped to 57.5, employment dropped to 48.4

          US ISM Manufacturing Index dropped to 57.5 in November, down from 59.3, matched expectations. The second stayed in expansion for the seventh month a in row, after a contraction in April.

          New orders dropped -2.8 to 65.1. Production dropped -2.2 to 60.8. Employment dropped -4.8 to 48.4, back below 50. Prices dropped -0.1 to 65.4.

          ISM said: “The manufacturing economy continued its recovery in November. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that will likely limit future manufacturing growth potential. Panel sentiment, however, is optimistic (2.5 positive comments for every cautious comment), an improvement compared to October.

          Full release here.

          Canada GDP grew 0.8% mom in Sep, still -5% below pre-pandemic level

            Canada GDP grew 0.8% mom in September, slightly below expectation of 0.9% mom. That’s, nonetheless, still the fifth consecutive monthly increase. Overall total economic activity was also still -5% below February’s pre-pandemic level. Both goods-producing (0.7%) and services-producing (0.8%) industries were up as 16 of 20 industrial sectors posted increases in September.

            Looking ahead, preliminary information indicates just around 0.2% increase in real GDP for October.

            Full release here.

            OECD forecast global growth at 4.2% in 2021, 3.7% in 2022

              The OECD said in its latest Economic Outlook report that the global economy will grow 4.2% in 2021, after contracting -4.2% this year. Growth is then expected to slow to 3.7% in 2022.

              • US GDP is expected to contract -11.2% in 2020, rise 4.2% in 2021, then 4.1% in 2022.
              • Eurozone GDP is expected to contract -7.5% in 2020, rise 4.6% in 2021 and then 3.3% in 2022.
              • China’s GDP is expected to grow 1.8% in 2020, surge to 8.0% in 2021, and then slow to 4.9% in 2022.

              OECD added: “The recovery would be stronger if vaccines are rolled out fast, boosting confidence and lowering uncertainty. Delays to vaccination deployment, difficulties controlling new virus outbreaks and failure to learn lessons from the first wave would weaken the outlook.”

              “We’re not out of the woods. We’re still in the midst of a pandemic crisis, which means that policy still has a lot to do,” said OECD chief economist Laurence Boone.

              Full report here.

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              ECB Schnabel: It’s appropriate to preserve financing conditions rather than ease much further

                Regarding the upcoming policy recalibration, ECB Executive Board member Isabel Schnabel said it’s “appropriate to focus on preserving” the financing conditions, “rather than easing much further”. She emphasized, “if it’s necessary to do something that doesn’t meet market expectations, we have to do that nevertheless.”

                “I indeed hope this will be the last big push (on monetary stimulus”, but we can never know what’s going to happen,” she said. “There is a positive scenario where we get a swift recovery and the scarring is relatively limited. But there is also the risk of the crisis being more protracted.”

                She’s open to extending the PEPP window by 12 months to June 2021. On the topic of further rate cut, “there is no technical reason why this could not be lowered,” she said. “The question is whether this is considered appropriate.”

                Eurozone CPI unchanged at -0.3% yoy, core CPI at 0.2% yoy

                  Eurozone CPI was unchanged at -0.3% yoy in November, versus expectation of 0.2% yoy. Core CPI was unchanged at 0.2% yoy. Looking at the main components, food, alcohol & tobacco is expected to have the highest annual rate in November (1.9%, compared with 2.0% in October), followed by services (0.6%, compared with 0.4% in October), non-energy industrial goods (-0.3%, compared with -0.1% in October) and energy (-8.4%, compared with -8.2% in October).

                  Full release here.

                  UK PMI manufacturing finalized at 55.6, 35-month high

                    UK PMI Manufacturing was finalized at 55.6 in November, up from October’s 53.7. It’s also a 35-month high, and an expansion reading for six successive months. Markit noted that “Brexit buying” leads to higher purchasing, stocks and exports.

                    Rob Dobson, Director at IHS Markit: “Growth of the UK manufacturing sector picked up in November, temporarily boosted by ‘Brexit-buying’ among clients and the ongoing boost from economies re-opening following lockdowns earlier in the year…. Whether the upturn of manufacturing production can be sustained into the new year is therefore highly uncertain, especially once the temporary boosts from Brexit purchasing and stockbuilding wane.

                    “On this front some reassurance is provided by the survey’s gauge of business optimism. Confidence has risen to a level not seen since late-2014, with over three fifths of manufacturers (61%) still expecting to raise output over the coming year. On the other hand, many manufacturers remain very concerned about the outlook and generally reluctant to expand capacity, hence employment fell for the tenth month in a row.”

                    Full release here.

                    Eurozone PMI manufacturing finalized at 54.8, a brighter outlook indicated by upturn in optimism for year ahead

                      Eurozone PMI Manufacturing was finalized at 53.8 in November, down from October’s 54.8. Markit said there were slower, but still marked gains in output and new orders. Job losses continued but confidence improved further. Looking at some member states, Germany PMI Manufacturing stood high at 57.8. The Netherlands hit 22-month high at 54.4. However, Italy hit 5-monthlow at 51.5. Spain hit 5-month low at 49.8. France hit 6-month low at 49.6. Greece hit 6-month low at 42.3.

                      Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturing output continued to grow at a decent pace in November… The survey therefore adds to evidence that the region will avoid in the final quarter of the year a similar scale of downturn recorded in the second quarter… Encouragingly, a brighter outlook is indicated by the upturn in optimism for the year ahead, suggesting that the upturn should gather strength again in the coming months as lockdown measures ease and spending, especially investment, picks up in response to the recent news on vaccine development.”

                      Full release here.

                      Swiss GDP grew 7.2% qoq in Q3, still -2% below pre-crisis level

                        Swiss GDP grew 7.2% qoq in Q3, above expectation of 5.8% qoq. Still, output was -2% below pre-crisis level, after contracting by a total of -8.6% in the first half of the year.

                        Looking at some details, private consumption bounded significantly by 11.9% following gradual easing of coronavirus restrictions. Investment in equipment rose 8.8% and investment in construction rose 5.1%. Final domestic demand posted 8.9% growth.

                        Full release here.

                        Also from Swiss, SVME PMI rose to 55.2 in NOvember, up from 52.3, well above expectatio nof 51.5.

                        RBA stands pat, prepared to more if necessary

                          RBA left monetary policy unchanged as widely expected. Cash rate target and 3-year AGS yield target are kept at 0.10%. The parameters and term funding facility and government bond purchases were maintained too. It continued to expect no increase in cash rate for “at least 3 years”. Bond purchase size will continue to be under review. The Board is “prepared to do more if necessary”.

                          Regarding the economy, RBA said “recent data have generally been better than expected… but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support”. GDP would not reach pre-pandemic level until the end of 2021. While employment growth was strong in October, further rise in unemployment is still expected. Inflation is expected to remain subdued till 2022.

                          Full statement here.

                           

                          Australia AiG manufacturing dropped to 52.1, but recovery prosect continues

                            Australia AiG Performance of Manufacturing Index dropped -4.2 pts to 52.1 in November, indicating expanding conditions at a slower rate. Looking at some details, all seven activity indices declined. Production dropped -2.6 to 52.5. Employment dropped -2.5 to 52.8. New orders dropped -5.1 to 53.3. Exports dropped -2.7 to 50.0. Four of the six manufacturing sectors expanded, including machinery & equipment, metal products, petroleum, textiles & clothing.

                            Ai Group Chief Executive Innes Willox said: “The manufacturing sector was broadly stable in November after a return to positive territory in October… Encouragingly, both new orders and employment continued to grow in November, pointing to the prospect of a continuing recovery as we head towards the end of the year”.

                            Full release here.

                            Also released, building permits rose 3.8% mom in October, above expectatio nof -3.0% mom decline. current accoutn surplus narrowed to AUD 10.0B in Q3, larger than expectation of AUD 7.1B.

                            Japan PMI manufacturing finalized at 49.0, optimistic on future output

                              Japan PMI Manufacturing was finalized at 49.0 November, up from October’s 48.7. While still concretionary, it’s already the highest reading since August 2019. Markit also noted softer falls in both output and news orders. Businesses also remained optimistic regarding future output.

                              Usamah Bhatti, Economist at IHS Markit, said: “Concern remains that weaknesses caused by the COVID-19 pandemic persisted as both output and new orders both fell for the twenty-third month in a row. Furthermore, infection rates have surged in both domestic and international markets which resulted in a renewed fall in export orders, which dampened confidence further.

                              “However, Japanese manufacturers continue to report a positive outlook beyond the immediate concerns surrounding the sector. Around 33% of survey respondents foresee a rise in output over the coming year amid hopes that the pandemic dissipates and a robust economic recovery. Currently, IHS Markit expects industrial production to grow 7.3% in 2021 although this is from a lower base and does not fully recover the output lost to the pandemic.”

                              Full release here.

                              Also from Japan, unemployment rate rose to 3.1% in October versus expectation of 3.0%. Capital spending dropped -10.6% in Q3 versus expectation of -12.0%.

                              China Caixin PMI manufacturing rose to 54.9, highest in a decade

                                China Caixin PMI Manufacturing rose to 54.9 in November, up from 53.6, above expectation of 53.6. That’s also the strongest reading since November 2010. The sector improved for the seven straight months, indicating a sustained and strong recovery. Markit also noted that both output and new orders increased at the fastest rates for 10 years. Employment expanded at quickest pace since May 2011.

                                Wang Zhe, Senior Economist at Caixin Insight Group said: “We expect the economic recovery in the post-epidemic era to continue for several months. At the same time, deciding how to gradually withdraw the easing policies launched during the epidemic will require careful planning as uncertainties still exist inside and outside China.”

                                Full release here.

                                 

                                IMF: Further support likely need from ECB

                                  IMF warned that the second wave of coronavirus “poses a considerable risk to the recovery” of EU’s economy, “through early 2021″. But, ” the recent promising news on vaccine development provide significant upside risk further out , as rapid and widespread delivery of safe and effective vaccines would likely spur a fast recovery”.

                                  It added that “further support is likely to be needed” from ECB, with economic outlook “deteriorating further”. “Expanding asset purchases will be the first line of defense, but other options—including further relaxation of Targeted Longer-Term Refinancing Operations’ terms and a deposit rate cut—should also be considered.”

                                  IMF’s “Euro Area: Staff Concluding Statement of the 2020 Article IV Mission”

                                  BoE Tenreyo: Boosts from vaccines only come when they’re rolled out widely

                                    BoE MPC member Silvana Tenreyo welcome the news regarding coronavirus vaccine development. however, the economic boosts would not come until vaccines are actually rolled out widely. Households could still delay spending until the vaccines due to health risks.

                                    Also she noted that the progress on job markets remain one of the bigger downside risks to BoE’s medium term economic outlook. Her vote for more QE at last meeting was for guarding against market dysfunctioning.

                                    CAD/JPY ready for rebound resumption after mixed data

                                      A batch of mixed economic data is released from from Canada today, IPPI dropped -0.4% mom in October versus expectation of 0.0% mom. RMPI rose 0.5% mom versus expectation of -2.0% mom. Building permits dropped -14.6% mom versus expectation of-3.8% mom. Current account deficit narrowed slightly to CAD -7.5B in Q3, smaller than expectation of CAD -8.6B.

                                      Canadian Dollar is currently one of the strongest for today. CAD/JPY after drawing support from 4 hour 55 EMA. Break of 0.80.42 will resume the rebound from 79.22 to 81.42 resistance. Still, it’s uncertain if CAD/JPY is ready to breakout from range pattern started at 81.91. We’ll see.

                                      ECB President Lagarde speaks at EPC Thought Leadership Forum

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                                        Swiss KOF dropped to 103.5, retail sales rose 3.1% yoy

                                          Swiss KOF Economic Barometer dropped to 103.5 in November, down from 106.6, above expectation of 101.0. The barometer is thus moving towards its long-​term average, which means that the outlook for the Swiss economy remains subdued also in view of the current pandemic situation.

                                          Also from Swiss, retail sales rose 3.1% yoy in October.