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G10 Macro Rates Market Analysis – Weekly Review – 7th December 2020

Tuesday, December 08, 2020

With the Pacific G10 Macro Rates Team 
Last week started with Chinese data showing strong PMIs and CPI as expected. South Korean trade data was also strong, showing good underlying regional demand.

However new Covid restrictions put a dampener on the US Nonfarm payrolls, which printed disappointingly low on Friday. This did not create a bid for bonds as upcoming bond supply and rumours of an imminent fiscal deal, meant that the UST10y yield finished the week 13bp higher and the 5-30 UST curve 11bp steeper. The reflation trade was back in business! Less enthusiasm in Europe though as Service PMI’s continued to dive and the last-minute Brexit negotiations are heading to a crescendo of make or break.

North America
US: The all-important jobs data came in undeniably weak, with Nonfarm Payrolls +245k (460k exp., 638k prev.), private payrolls +344k (540k exp., 906k prev.). The unemployment rate dropped from last month to 6.7% (6.7% exp., 6.9% prev.) but the U6 remains significantly elevated at +12.0% (12.1% prev.)

The strength of the economic rebound is well represented by the PMIs which were stronger and remain at a high level as well as the ISMs which were slightly lower, but in extremely high territory (ex-employment).

The FOMC released the Beige book, of note was several districts seeing little to no growth, presenting the committee with a challenge for its December meeting.

Canada: Manufacturing PMI ticked higher at 55.8 (55.5 prev.) and 3Q GDP echoed the worldwide bounce at +40.5% (47.9% exp., -38.7% prev.) Employment was stronger than south of the boarder at +62.1k (20.0k exp., 83.6k prev.) with the unemployment rate dropping to 8.5% (9.0% exp., 8.9% prev.) and only the fly in the ointment was the participation at 65.1% (65.2% exp., 65.2% prev.)

Eurozone: CPI printed -0.3% MoM (-0.3% exp., 0.2% prev.) as expected and retail sales bounced 1.5% MoM (0.7% exp., -2.0% prev.) 4.3% YoY (2.6% exp., 2.2% prev.) German CPI was weaker at -0.8% MoM (-0.7% exp., 0.1% prev.) and -0.3% YoY (-0.2% exp., -0.2% prev.). Unemployment dropped to 6.1% (6.3% exp., 6.2% prev.), retail sales improved to 2.6% MoM (1.2% exp., -2.2% prev.) and 8.2% YoY (5.8% exp., 6.5% prev.) and factory orders were also strong at 2.9% (1.5% exp., 0.5% prev.). Italian consumer data was stronger with CPI at 0.0% MoM (-0.2% exp., 0.6% prev.) and -0.3% YoY (-0.5% exp., -0.6% prev.), the unemployment rate 9.8% (9.9% exp., 9.6% prev.) and retail sales 0.6% MoM (0.3% exp., -0.8% prev.) and 2.9% YoY (0.7% exp., 1.3% prev.) PMIs were all weaker.

Sweden: PMIs were unambiguously strong.

Norway: NNo significant releases.

Industrial production improved to 3.8% MoM (2.4% exp., 3.9% prev.) and -3.2% YoY (-4.6% exp., -9.0% prev.). Retail sales 0.4% MoM (0.5% exp., -0.1% prev.) and 6.4% YoY (6.2% exp., -8.7% prev.). The jobless rate ticked up to 3.1% (3.1% exp., 3.0% prev.) but the Job-To-Applicant ratio was stronger T 1.04 (1.03 exp., 1.03 prev.) and consumer confidence remained low 33.7 (33 exp., 33.6 prev.) a


PMIs improved from the previous the month.

Australia: Victoria easing lockdown restrictions showed with better housing data, retail sales +1.4% (-1.1% prev.) and manufacturing PMI at 55.8 (56.1 prev.) 3Q GDP was in line at 3.3% QoQ (2.5% exp., -7.0% prev.) bringing the YoY measure to -3.8% (-4.4% exp., -6.3% prev.). The RBA left its cash and 3-Yr targets unchanged, but tweaked its communications on employment, wage growth and inflation. The result is a more explicitly dovish message, although arguably, little practical change. 

New Zealand: No significant releases.

 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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