UK PMI manufacturing rose to 55.9, services rose to 49.9

    UK PMI Manufacturing rose to 57.3, up from 55.6, above expectation of 55.9, 37-month high. PMI Services rose to 49.9, up from 47.6, below expectation of 50.5. PMI Composite rose to 50.7, up from 49.0.

    Chris Williamson, Chief Business Economist at IHS Markit, said: “The UK economy returned to growth in December after the lockdown-driven downturn seen in November, adding to signs that the hit to the economy from the second wave of virus infections has so far been far less harsh than the first wave in the spring…. Business optimism about the year ahead also remained buoyant, reflecting the light at the end of the tunnel created by the roll-out of the COVID-19 vaccines. Optimism waned slightly compared to November, however, largely due to rising concerns over a no-deal Brexit.”

    Full release here.

    Eurozone PMI manufacturing rose to 55.5, companies also become increasingly optimistic

      Eurozone PMI Manufacturing rose to 55.5 in December, up from 53.8, above expectation of 53.0, a 55-month high. PMI Services rose to 47.3, up from 41.7, well above expectation of 40.9. PMI Composite also rose to 49.8, up from 45.3.

      Chris Williamson, Chief Business Economist at IHS Markit said: “The data hint at the economy close to stabilising after having plunged back into a severe decline in November amid renewed COVID- 19 lockdown measures. The fourth quarter downturn consequently looks far less steep than the hit from the pandemic seen earlier in the year, though the picture is very mixed by sector. Companies have also become increasingly optimistic about the year ahead, with vaccine rollouts expected to help restore businesses to more normal trading conditions as 2021 progresses.”

      Full release here.

      Germany PMI manufacturing rose to 58.6, 34-mth high, outlook also positive

        Germany PMI Manufacturing rose to 58.6 in December, up from 57.8, above expectation of 56.6, a 34-month high. PMI Services rose to 47.7, up from 46.0, above expectation of 44.0. PMI Composite rose to 52.5, up from 51.7.

        Phil Smith, Associate Director at IHS Markit said: “German economy still on a relatively stable platform… However, the impending harder lockdown threatens to put pay to some of the resilience we’ve seen so far… Nevertheless, German manufacturers and their service sector counterparts are positive about the outlook for 2021, amid the imminent rollout of COVID vaccines.”

        Full release here.

        France PMI composite rose to 49.6, expansionary mindset exemplified in employment and confidence

          France PMI Manufacturing rose to 51.1 in December, up from 49.6, above expectation of 49.6. PMI Services rose to 49.2, up from 48.8, above expectation of 39.3. PMI Composite rose to 49.6, up from 40.6, a 4-month high.

          Eliot Kerr, Economist at IHS Markit said: “With lockdown restrictions having eased this week and a clearer pathway to immunizing the population ahead, firms can now begin working back up towards pre-coronavirus levels of activity. That expansionary mindset was exemplified by the first increase in employment for ten months and confidence levels reaching their highest since January.”

           

          Full release here.

          UK CPI slowed to 0.3% yoy in Nov, CPI core dropped to 1.1% yoy

            UK CPI slowed sharply to 0.3% yoy in November, down from 0.7% yoy, missed expectation of 0.6% yoy. CPI core slowed to 1.1% yoy, down from 1.5% yoy, missed expectation of 1.4% yoy. RPI also slowed to 0.9% yoy, down from 1.3% yoy, missed expectation of 1.3% yoy.

            PPI input came in at 0.2% mom, -0.5% yoy. PPI output was at 0.2% mom, -0.8% yoy. CPPI core output was at 0.0% mom, 0.9% yoy.

            Full release here.

            USD/JPY weakening ahead of FOMC

              Fed should leave all the monetary policy measures unchanged today: Fed funds rate should stay unchanged at 0-0.25% and asset purchases at USD120B per month. The focus of the meeting will be on the adjustment of the forward guidance about the asset purchase program. It will be a qualitative, outcome-based guidance as “most” members favored.

              Additionally, the statement will be accompanied by the updated economic projections and median dot plots about the policy rate outlook. For the former, thanks to the vaccine news, the Fed might upgrade GDP growth and inflation forecasts for 2021. We expect the majority of members would project no rate hike until end-2023. Yet, it is possible that more members would anticipate an increase before that, when compared with the last projections.

              Some previews here:

              Dollar is generally holding inside last week’s range for now, except against Yen. USD/JPY’s break of 103.51 temporary now put focus to 103.17 support. Decisive break there resume the down trend from 111.71 towards 101.18 low. If that happens, we might also see a break of 1.2177 temporary top in EUR/USD, and 90 psychological level in Dollar index.

              Japan exports struggled in record losing streak

                Japan’s exports dropped -4.2% yoy to JPY 6.11T. Imports dropped -11.1% yoy to JPY 5.75T. Trade surplus came in at JPY 367B. In seasonally adjusted terms, Trade surplus widened to JPY 0.57T, slightly above expectation of JPY 0.55T.

                The data marked the 24th straight month of year-over year decline in exports, longest streak on record since 1979. By destination, exports to the US contracted for the first time in three months, by -2.5% yoy. Exports to China rose 3.8% yoy, slowest pace in five months. Exports to Asia also dropped for the first time in two months, by -4.3% yoy. Exports to EU dropped -2.6% yoy.

                Japan PMI Manufacturing rose to 49.5, still struggling but turning optimistic

                  Japan Jibun Bank PMI Manufacturing rose to 49.5 in December, up from 48.8. PMI Services dropped to 47.2, down from 47.8. PMI Composite dropped to 48.0, down from 48.1.

                  Usamah Bhatti, Economist at IHS Markit, said: “Despite the short-term disruption caused by a resurgence in coronavirus disease 2019 (COVID-19) cases, Japanese private sector businesses were optimistic that business conditions would improve in the year-ahead. Positive sentiment stemmed from the expectation that there would be an end to the pandemic which would fuel both domestic and international demand. Nevertheless, uncertainty surrounding the timing and pace of the economic recovery resulted in a softening of expectations.”

                  Full release here.

                  Australia leading index rose to 4.38, strongest growth rate in history

                    Australia Westpac-Melbourne Institute Leading Index rose from 3.77% to 4.38% in November. That’s the strongest growth rate in the sixty year history of the measure. Though, Westpac said “the gains still largely reflect the severity of the preceding contraction”. In level terms, the index has now “recouped 80%” of that fall.

                    Westpac expects RBA to introduce a second AUD 100B QE program in February meeting. That would be followed by two smaller program of AUD 50B each in the year to October 2022.

                    Full release here.

                    Australia PMI composite rose to 57, improvements in demand, employment and optimism

                      Australia CBA PMI Manufacturing rose to 56.0 in December, up from 55.8, hitting a 36-month high. PMI Services rose to 57.4, up from 55.1, a 7-month high. PMI Composite rose to 57.0, up from 54.9, a 5-month high.

                      Pollyanna De Lima, Economics Associate Director at IHS Markit, said: “Not only was the Australian economic recovery sustained in December, but growth also gathered momentum as the loosening of COVID-19 restrictions underpinned further improvements in demand for goods and services…. Both goods producers and service providers continued to hire extra staff, the former to the greatest extent in close to three years… Private sector companies were at their most optimistic in over two years…One area that failed to improve was exports… The latest fall in international sales was the eleventh in successive months.”

                      Full release here.

                      BoC Macklem: Vaccines put more certain timeline on global demand resurgence

                        In a speech, BoC Governor Tiff Macklem said the economic recovery from the pandemic is “at a very difficult stage”. For the nears term, rising coronavirus infections will “dampen growth and could even deepen our economic hole” and uncertainty is “elevated”. The recovery is going to be “long and choppy”.

                        Nevertheless, he noted that “trade has bounced back faster than many economists had predicted” and are expected to be strong in 2021. News of vaccines also “puts a more certain timeline on the resurgence of global demand”. “As a country, we need to leverage the broad trade access we have and work with like-minded countries to foster a renewed spirit of open, rules-based trade that works for the 21st century.”

                        Full speech here.

                        Gold reclaiming 1850 after strong rebound

                          Gold drew support from 1821.96 support earlier this week, despite dipping to 1819.09. Subsequent rebound retains near term bullishness. Breach of 1850.11 resistance suggests that stronger rise could be seen back to retest 1875.27 resistance first. Break will resume the rally from 1764.31 for 61.8% projection of 1764.31 to 1875.27 from 1819.05 at 1887.62 next. We’ll see if that would happen.

                           

                          WTI mildly higher, eyeing 47.66 temp top for rally resumption

                            WTI crude oil trades mildly higher today with focus now back on 47.66 temporary top. Break will resume rise from for 50 handle and above. We’re looking at a long term resistance in 55 month EMA at 52.79 to limit upside, at least on first attempt. However, considering bearish divergence condition in 4 hour MACD, break of 44.87 will indicate short term topping. Deeper pull back could then be seen to 55 day EMA at 42.49.

                            UK Johnson: No deal Brexit remained the most likely outcome

                              UK Prime Minister Boris Johnson spokesman told reporters today, “the prime minister made clear that not being able to reach an agreement and ending the transition period on Australia-style terms remained the most likely outcome but committed to continuing to negotiate on the remaining areas of disagreement.”

                              On the other hand, Germany’s ambassador to EU Michael Clauss said, the negotiations are “not over yet”” and “there are still a few days ahead of us”. “There is still a chance for a deal by the end of the week.”

                              US Empire State manufacturing dropped to 4.9, but employment posted strongest gains in months

                                US Empire State manufacturing index dropped to 4.9 in December, down from 6.3. New orders increased marginally, and shipments were modestly higher. Inventories continued to move lower, and delivery times edged up. Employment posted its strongest gain in months, and the average workweek lengthened somewhat. Input prices increased at the fastest pace in two years, while selling prices increased at about the same pace as last month.

                                Import price index rose 0.1% mom in November, below expectation of 0.3% mom.

                                SECO downgrades 2021 Swiss GDP growth for coronavirus second wave

                                  State Secretariat for Economic Affairs SECO downgrade 2021 growth forecast as “the second wave of the coronavirus will have an adverse effect on the Swiss economy”. Also, “rising case numbers and the measures to combat the coronavirus will slow international economic development considerably in the winter half-year of 2020/2021, especially in Europe. ” Though, “less dramatic containment measures have been taken than last spring and the overall economic impact is likely to be less severe.”

                                  For 2020 as a whole, GDP is projected to contract -3.3%, worst since 1975. 2021 GDP growth forecast was revised down from -3.8% to 3.0%. The Swiss economy should return to pre-crisis levels towards the end of 2021. For 2022, GDP is projected to grow 3.1%.

                                  Full release here.

                                  ECB Rehn: New PEPP envelop is a ceiling, not a target

                                    ECB Governing Council member Olli Rehn said that the new EUR 1.86T “envelop” of the central bank’s Pandemic Emergency Purchase Programme is not a target but a ceiling for now”. He added, “we will implement the programme so that we can ensure favorable financing conditions and that means we are taking market conditions, market developments into implementation.”

                                    He also said ECB will monitor FX “very closely”, and will take market conditions into implementation”. Though, he reiterated that exchange rate is not a policy target.

                                    UK claimant count rose 64.3k in Nov, unemployment rate ticked up to 4.9% in Oct

                                      UK claimant count rose 64.3k in November, above expectation of 10.5k. That represents a 2.5% monthly increase. The total count, at 2.7m, was 114.8% above March’s level.

                                      Unemployment rate rose 0.1% to 4.9% in the three months to October, below expectation of 5.1%. Average earnings including bonus rose 2.7% 3moy, above expectation of 2.3%. Average earnings excluding bonus rose 2.8% 3moy, above expectation of 2.6%.

                                      Full release here.

                                      USD/CNH staying in consolidation after strong China data, down trend in force

                                        China’s industrial production rose 7.0% yoy in November, up from October’s 6.9% yoy, matched expectations. Retail sales rose 5.0% yoy, up from October’s 4.3% yoy, but missed expectation of 5.1% yoy. Auto sales rose 11.8% yoy while household appliances sales rose 5.1% yoy. Communications equipment sales even jumped 43.6% yoy. Fixed asset investment rose 2.6% ytd yoy, up from October’s 1.8% ytd yoy, beat expectation of 2.6%. Private sector fixed-asset investment rose 0.2% ytd yoy, turned positive from October -0.7%.

                                        USD/CNH recovers mildly today as consolidation form 6.4960 extends. Downside momentum has been diminishing as seen in 4 hour MACD. But outlook stays bearish as long as 6.5968 resistance holds. The down trend from 7.1953 medium term top should still extend to 61.8% retracement of 6.0153 to 7.1953 at 6.4661. There we’d expect strong support to bring a sustainable corrective rebound.

                                        AUD/JPY retreats mildly but further rise expected with 77.09 support intact

                                          AUD/JPY dips mildly today as Australia Dollar pulls back broadly. This is in response to China’s new hostile trade action in banning Australian coals. Though, the retreat in AUD/JPY is shallow so far and doesn’t warrant a reversal yet. Further rise will remain in favor as long as 77.09 resistance turned support holds.

                                          Still, we’d emphasize that the real test lies in long term channel resistance (started back at 105.42 in 2013). Sustained break there will be a strong signal of an emerging bullish trend and pave the way to 61.8% projection of 59.89 to 78.46 from 73.13 at 84.60 in the medium term. However, rejection by the channel resistance, followed by break of 77.09 support, will retain long term bearishness and turn focus back to 73.13 support.