Markets
The trading week ends on a fairly uneventful note. The rift opening up between US Treasury Secretary Mnuchin and the US Federal Reserve on claiming unspent resources scared (thin) Asian dealing, but didn’t resonate through the European and US session. European shares currently trade narrowly positive; whereas US counterparts lose marginally ground. The US yield curve bear steepens marginally with yields rising by up to 1.6 bps. The German yield curve bull steepens with yield shedding up to 1.5 bps (2-yr). 10-yr yield spread changes vs Germany are broadly unchanged. The US underperformance vs German Bunds could partly be linked to next week’s US Treasury end-of-month refinancing operation. The US Treasury exceptionally kicks off on Monday with 2-yr and 5-yr Note auction in a holiday-thinned trading week. EUR/USD remained stuck in the high 1.18 area, so far unable to take out the 1.19 resistance area. The dollar traded softish in general with the trade-weighted greenback keeping 92.13/91.75 support on the radar. Moves in sterling cross rates remain very small even after the EU warned that the UK hasn’t moved sufficiently to overcome main stumbling blocks for a post-brexit trade deal. Sources suggest that negotiations could now last well into December because of the very slow progress. Several EU leaders already called upon the European Commission to make contingency no deal plans.
• Focus shifts to November EMU PMI’s early next week. Consensus expects the composite PMI to crash from 50 to 45.6, mainly because of the lockdown-hit to domestic services sectors (42). It would be the first sub-50 print since June and the weakest outcome since May. External (mainly Asian) demand is expected to keep the manufacturing gauge above the 50 boom/bust mark. Risks are probably tilted to the downside with October details already providing a stark warning and economic developments since being disadvantageous. The PMI’s will be a harbinger for another negative growth quarter in Europe while laying the groundwork for downward revisions to the ECB’s growth and inflation forecasts at the early December meeting. The latter will in turn be used to defend an extension & expansion of the Pandemic Emergency Purchase Programme and TLTRO’s. The US calendar is frontloaded next week with activity numbed by Thanksgiving Holiday (Thursday) and Black Friday.
News Headlines
Belgian consumer confidence restored to the highest level since March, from -17 to -15 in November. Belgian consumer’s optimism about the economy twelve months ahead rose to levels seen just before the pandemic hit. Fears for rising unemployment also ebbed though very moderately and are still at very high levels historically. Saving intentions rose, revealing caution among Belgian consumers.
Analysts estimate Argentina’s net currency reserves are now at or near zero, leaving the country’s central bank with no choice but to double down on capital controls or allow the peso to devalue further and with less FX intervention to control the decline. Officially, USD/ARS trades at 80.35 today but prices on the black market are estimated to be double. The price decoupling accelerated during 2020 and especially since the coronavirus outbreak.
The World Trade Organization said global trade in goods rebounded at the end of the third quarter from the COVID-19 lockdowns. Its barometer rose from a record low of 84.5 in August to 100.7 in September (> 100 indicates above-trend growth). It expects a slowing again in the current quarter. High-frequency data pointed at a stalled recovery of international flights and container shipping in October.
