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G10 Macro Rates Market Analysis – Weekly Review – 30th November 2020

Monday, November 30, 2020

With the Pacific G10 Macro Rates Team 
Italian and French COVID cases turned the corner, the USA and Japan reported increases and the UK announced a transition out of national measures. A Brexit deal was nearly agreed, but not quite, again.

The UK chancellor released his spending review showing the economic wreckage of the COVID-19 pandemic. The result was a forecasted 11% drop in GDP, the most in 300 years and an annual deficit of just under 400bln this year, up from just 56bln last. RPI reform was also formally released, keeping to the previous guidance of a transition to CPI in 2030

The Riksbank kept rates unchanged but surprised the market with a 200bln increase in QE. And in Europe 2 speakers from the ECB (Lane and Villeroy) hinted at concerns over bank financing increasing the range of outcomes at the next meeting. FOMC’s minutes showed a lengthy discussion of asset purchases at the November leading commentators to look for a change of its QE policy at the December meeting.

Thanksgiving in the US led to subdued volumes with rates markets moving little. There was more activity in currencies and commodities as the USD weakened and oil and copper traded higher.

North America
US: Nov PMIs printed higher with increases in manufacturing 56.7 (53 exp., 53.4 prev.), services 57.7 (55 exp., 56.9 prev.)

Nov consumer confidence was hit by COVID news dropping to 96.1 (98 exp., 100.9 prev.) mostly driven by expectations at 89.5 (98.4 prev.)

Oct PCE deflator was weak on a headline and core levels, with both printing 0.0% MoM (0.0% exp., 0.2% prev.) bringing the core YoY deflator to 1.4% (1.4% exp., 1.5% prev.)

Canada: No tier 1 data

Eurozone: Eurozone wide PMIs were weak with services at 41.3 (42 exp., 46.9 prev.) and the composite at 45.1 (45.6 exp., 50 prev.) The weakness was reflected in confidence measure too.

French PMIs have been hit by COVID-19 restrictions with services at 38 (39.6 exp., 46.5 prev.) and the composite at 39.9 (42 exp., 47.5 prev.). Confidence broadly followed with the business measure at 79 (84 exp., 90 prev.), manufacturing at 92 (91 exp., 93 prev.) and the consumer at 90 (92 exp., 94 prev.) CPI managed to tick up a little at 0.2% MoM (0.0% exp., 0.0% prev.) bringing the annualised measure to +0.2% (0.0% exp., 0.1% prev.) Consumer spending was strong at +3.7% (3.5% exp., -5.1% prev.) and 2.7% YoY (1.8% exp., -1.3% prev.)

German PMIs were a little weaker with services at 46.2 (46.3 exp., 49.5 prev.) and the Composite at 52 (50.5 exp., 55 prev.). The much-watched IFO survey had the current assessment at 90 (87.5 exp., 90.3 prev.) and the business climate at 90.7 (90.2 exp., 92.7 prev.), but expectations lower at 91.5 (93.5 exp., 95 prev.)

Italian economic sentiment dropped to 82.8 (92.9 prev.) as did consumer confidence 98.1 (99 exp., 102 prev.) and manufacturing confidence 90.2 (93 exp., 95.6 prev.)

Sweden: 3Q GDP QoQ 4.9% (4.3% exp., -8.3% prev.) and Oct retail sales were strong +0.5% MoM (0.1% exp., 0.8% prev.)

Norway: Nov Unemployment Rate dropped to 3.9% (4.0% exp., 3.5% prev.) and Oct core retail sales were equally strong +1.2% MoM (0.5% exp., 0.3% prev.)

No tier 1 data


PMIs were more resilient in the UK with services at 45.8 (43 exp., 51.4 prev.) and the composite at 47.4 (42.5 exp., 52.1 prev.)

Australia: Nov PMIs ticked slightly higher with services at 54.9 (53.7 prev.) and the composite 54.7 (53.5 prev.) 

New Zealand: 3Q retail sales posted a strong bounce at 28.0% QoQ (19.0% exp., -14.6% prev.) and consumer confidence -1.7% MoM (8.7% prev.)

 For further information on the Pacific G10 Macro Rates team, their experience and strategy please see below  

Read the Strategy Information Sheet

IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority . The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation.

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