European Headlines and Economic data
Flash Eurozone PMI falls to lowest since May, adding to signs of fourth quarter downturn
Job losses continue, though rate of decline holds steady
Selling prices fall, but manufacturers see upward pressure on input costs
Sharp decline in French business activity amid fresh COVID-19 lockdown – Flash France Services Activity Index at 38.0 in
November (46.5 in October), 6-month low
German GDP rose by 8.5% in the third quarter of 2020 compared with the second quarter of 2020 after adjustment for price, seasonal and calendar variations. GDP was -3.9% on the same quarter a year earlier (price-adjusted)
ECB should weigh taking longer to hit inflation target: Schnabel – “The ECB targets inflation at just below 2% over the medium term, an undefined concept that has changed over time and is now understood to mean longer than the ECB’s two-year forecast horizon.”
Ifo institute expects German economy to shrink in fourth quarter – “Ifo’s business climate index fell to 90.7 from a downwardly revised 92.5 in October. The two monthly drops in a row followed five months of rises.”
Macron says worst of virus second wave over, lockdown to ease – “Positive trends including a decline in hospitalisations for COVID-19 infections, combined with pressure from business lobbies who say they are facing financial ruin, have led to calls to start loosening the lockdown as soon as possible.”
Annual growth rate of broad monetary aggregate M3 stood at 10.5% in October 2020, after 10.4% in September 2020; Annual growth rate of adjusted loans to non-financial corporations decreased to 6.8% in October from 7.1% in September
Germany plans almost 180B euros of new debt in 2021 – Berlin extends aid measures to mitigate impact of the COVID-19 pandemic on Europe’s biggest economy
In Q3 2020, French producer prices of services increased by 0.5% vs. +0.1% in Q2 2020. – “Those for services sold to home businesses were back on the rise (+0.3% after a stability), as well as prices of services sold to households in France (+1.6% after –0.1%), while those of exported services fell back (–0.4% after +1.2%). Year on year, producer prices of services slowed down again (+0.5% after +0.8% and +1.6%).”
German Import prices fell -3.9% y/y in October; +0.3% m/m – ” In September 2020 and in August 2020 the annual rates of change were -4.3% and -4.0%, respectively. From September 2020 to October 2020 the index rose by 0.3%.”
The Swiss Franc
Swiss Headlines and Economic data
There were no major news or data points from Switzerland this week, and with the Swiss franc closing mixed and net negative, it’s likely price action was mainly dominated by global risk sentiment.
Risk sentiment was leaning positive this week, kicked off by another round of positive covid vaccine / therapy news (Oxford-AstraZeneca Covid vaccine shows an average 70% effectiveness in preventing the virus, FDA authorizes Regeneron’s Covid treatment for emergency use).
We also saw got news that the Trump team gave the go ahead to the GSA to begin to transition administration to the Biden team, reducing geopolitical uncertainty in the U.S.
Finally, rumors came out on Monday that President-elect Biden would tap former Fed head Yellen for Treasury, leading traders to price in a market friendly administration in 2021.
These were the likely drivers for positive global risk sentiment through Wednesday, and likely a contributor to the Swiss franc’s weakness for most of the week.
On Thursday, the franc recovered a bit, again with no major news or data drivers from Europe or even the U.S. It’s possible that the bounce was technically driven, and/or some negative risk sentiment may have played a role, possibly a move off of the continued difficulty that negotiators were having on the Brexit deal.
Some positive global risk sentiment returned on Friday, likely a reaction to news from China that industrial profits grew at the quickest monthly pace since early 2017.