Markets
After finishing the astonishing November rally with a dissonant yesterday, investors see the glass again half full rather than half empty. Yesterday’s setback probably was mainly an end-of month, technically inspired repositioning. Even so, today’s news headlines and data were also mostly market-friendly. The risk revival started in Asia this morning with strong PMI’s/growth data from the likes of China and Korea. EMU data were no real market movers, but the final manufacturing PMI was slightly upwardly revised (53.8). An unexpected decline in German unemployment was also good news even as the labour market is still propped up by government support measures. Pfizer and BioNTech filling for regulatory clearance of their Covid vaccine with authorities in Europe only reinforced the view/feeling that there is light at the end of the Covid tunnel. The OECD’s updated growth outlook was more balanced as the Paris-based organization signaled a long and difficult winter before the positive effects of a vaccine will filter through next year. Due the new spike in the virus the OECD cut its world growth outlook to 4.2% in 2021 from 5% expected in September. This didn’t hamper the equity rebound. European equity indices are gaining up to 1%. US markets are showing similar gains. This risk rebound this time also filtered through into the bond markets. The US yield curve bear steepens with yields rising between 1 bp (2-y) and 5.5 bps (30-y yield). The text of Fed Chair Powell’s statement before Congress was already available this morning. Powell welcomed the news on a vaccine but warned that significant challenges and uncertainties remain. European yields rose between 2 bps (2-y) and 3 bp (30-y). EMU headline inflation remained in negative territory (-0.3% Y/Y, close to expectations) reinforcing the case for additional ECB stimulus at next week’s policy meeting. However, comments from ECB’s Schnabel indicated that there is still debate within the ECB MPC on the amount of stimulus that is deemed necessary. Schnabel indicated that the ECB should focus on maintaining current (easy) financial conditions but sounded rather reluctant on a very aggressive new package. Schnabel’s comments might be one of the reasons why intra-EMU government bond spreads didn’t narrow further on the broader risk-on move.
The reversal on yesterday’s correction was also visible on the FX markets. Yesterday’s USD rebound apparently wasn’t anything more than a temporary short squeeze. Key technical levels that were already tested yesterday are again within reach (EUR/USD currently 1.1985 vs 1.2011 2020 top) or broken (DXY index at 91.66 vs previous low at 91.75). USD/JPY is again the exception to the rule with the pair returning to the 104.50 area. For sterling trading, there was still little concrete news on any progress in the Brexit negotiations even as both parties acknowledge that a solution will have to be reached in the ‘coming days’. Sterling declines, albeit modestly, against the euro (EUR/GBP 0.8980) but stabilizes against a broadly weaker dollar. In the Central Europe, the forint and the zloty continue their regional outperformance. The Czech korona doesn’t profit from solid eco data published today (cf infra).
News Headlines
Czech economic data beat forecasts today. Q3 GDP faced an upward revision from 6.2% to 6.9% Q/Q with the manufacturing PMI unexpectedly rising from 51.9 to 53.9. Czech growth remains down by 5% on a yearly basis. GDP details showed positive contributions from household consumption (5% Q/Q) and net exports as exports (26.2% Q/Q) rose faster than imports (16.3%Q/Q). Gross fixed capital formation (investments) fell by 5% Q/Q. The manufacturing PMI showed a solid improvement in the health of the sector with new orders rising at the fastest pace since July 2018. Covid-19 uncertainty keeps firms hesitant in hiring despite rising backlogs.
Amazon said that the Black Friday to Cyber Monday holiday season has been its biggest ever. They didn’t give a breakdown of their own numbers yet, but sales from independent businesses selling on its platform surged by more than 60% to $4.8bn. Industry estimates suggest that Cyber Monday was the biggest online shopping day ever for the US, with consumers unleashing some $11.4bn in pent-up Covid resources.
