With the Pacific G10 Macro Rates Team
The big news of the week was Pfizer announcing a viable vaccine with a 90% success rate in preventing Covid-19 infections. One should pause for thought at this, it is a truly astounding achievement. Within 9 months a vaccine to a pathogen that was unknown to humanity has been created and shown to be effective. Bravo to the medical world!
On the economic front Chinese inflation printed on the low side, reinforcing coming deflation worries from a supposedly high growth economY. Oct PPI YoY -2.1% (-1.9% exp., -2.1% prev.) and CPI YoY 0.5% (0.8% exp., 1.7% prev.)
On the political front, President Trump is still refusing to concede the election, more worryingly the GOP has been silent on the issue. Many foreign nations, including China have recognised Joe Biden as president elect.
On the Central Bank front Lagarde (ECB), Powell (FED) and Bailey (BOE) reiterated at a virtual conference that they have more “tools in the box” and are prepared to use them. The RBNZ surprised the market by reversing pledges to cutting rates negative despite previous hints to the contrary.
Market wise the week started with rates going up, and the long overdue equity rotation started from growth to value. However, Covid infections in the USA continued to rise to uncomfortable levels, so threats of heavier lockdowns reversed some of the initial movement.
US: Oct inflation was lower than expected (much the same as the trend in other countries) CPI Ex Food and Energy MoM 0.0% (0.2% exp., 0.2% prev.) However, expectations were higher with the U. of Mich. 1 Yr Inflation 2.8% (2.6% prev.) and 5-10 Yr Inflation 2.6% (2.4% prev.)
U. of Mich. Survey showed lower measures across the board with Sentiment at 77 (82 exp., 81.8 prev.), Current Conditions 85.8 (88.3 exp., 85.9 prev.) and Expectations 71.3 (79.1 exp., 79.2 prev.)
Canada: No tier 1 data.
Eurozone: Industrial Production was weak, reflecting increase Covid restrictions, with Sep MoM printing at -0.4% (0.6% exp., 0.7% prev.) and YoY -6.8% (-5.8% exp., -7.2% prev.) 3Q GDP was positive printing +12.6% QoQ (12.7% exp., 12.7% prev.) and -4.4% YoY (-4.3% exp., -4.3% prev.)
French unemployment reinforced countrywide stereotypes by exceeding expectations at 8.8% (7.5% exp., 7.0% prev.) Ind. Sentiment did not drop as much as expected at 97 (90 exp., 101 prev.) and Production numbers exceed expectations with the industrial at 1.4% (0.7% exp., 1.3% prev.) and the manufacturing at +2.2% (1.5% exp., 1.0% prev.). German ZEW Survey reflected their dower stereotype with expectations dropping to 39 (44.3 exp., 56.1 prev.) and the current situation -64.3 (-63.5 exp., -59.5 prev.) Italian Industrial Production slumped to -5.6% (-2.0% exp., 7.7% prev.), no stereotype there then.
Sweden: Oct inflation was lower than expected with CPIF MoM 0.0% (-0.1% exp., 0.1% prev.) and CPIF Excl. Energy MoM 0.2% (0.2% exp., 0.0% prev.)
Norway: Norwegian inflation was lower than expected with CPI 0.1% MoM (0.2% exp., 0.2% prev.) and YoY 3.4% (3.4% exp., 3.3% prev.)
No tier 1 data
3Q P GDP QoQ 15.5% (15.8% exp., -19.8% prev.) which annualises north of 78% adequately demonstrating the uselessness of doing so. The YoY measure came in at -9.6% (-9.4% exp., -21.5% prev.) which is roughly in line with most other countries.
Industrial Production was lower at 0.5% (1.0% exp., 0.3% prev.) as was Manufacturing Production at 0.2% (1.0% exp., 0.7% prev.) and Services at 1.0% (1.3% exp., 2.4% prev.). The ILO Unemployment Rate was as expected at 4.8% (4.8% exp., 4.5% prev.)
Australia: Nov Consumer Inflation Expectation 3.5% (3.4% prev.)
New Zealand: RBNZ Official Cash Rate was unchanged at 0.25% (0.25% exp., 0.25% prev.) with the big news being a back peddling on negative rates in future meetings.
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