European Equities: Service Sector PMIs and Brexit in Focus

Economic Calendar:

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a mixed day for the European majors on Wednesday, following Monday’s gains. The DAX30 and EuroStoxx600 fell by 0.52% and by 0.05% respectively, while the CAC40 ended the day up by 0.02%.

For the majors, concerns over a lack of progress towards Brexit pegged the majors back on the day. Also weighing on the majors and the DAX30, in particular, was news that the Democrats would retain the phase 1 trade agreement with China near-term.

There were positives, however, that provided support. News of the UK approving the BioNTech/Pfizer.inc vaccine delivered support, as did Joe Biden talk of a COVID-19 stimulus package.

According to reports on Wednesday, the President-Elect stated that delivering a COVID-19 stimulus package was an immediate priority.

The Stats

It was a relatively busy day on the Eurozone economic calendar. German retail sales figures for October were in focus going into the European open.

According to Destatis, retail sales rose by 2.6% in October, reversing a 1.9% slide in September. Economists had forecast a 1.2% rise.

  • Compared with the same month a year ago, retail sales were up by 8.2%.
  • Supermarket, self-service department shops, and hypermarket sales were up by 7.9%, year-on-year.
  • In the non-food retail sector, sales rose by 9.0%.
  • When compared with February 2020, the pre-COVID-19 pandemic month, retail sales rose by 5.9%.

Unemployment numbers from Spain and the Eurozone released later in the day had a muted impact on the majors.

In Spain, the unemployment rose by 25.3k in September, following a 49.6k jump in August.

For the Eurozone, the unemployment rate slipped from an upwardly revised 8.5% to 8.4% in October. Economists had forecast an unemployment rate of 8.4%.

According to Eurostat,

  • While down from 8.5% in September, unemployment was up from 7.4% in October 2019.
  • Compared with September 2020, Eurostat estimates that the number of unemployed persons fell by 91,000.
  • By contrast, however, the number of unemployed persons increased by 2.186 million when compared with October 2019.

From the U.S

ADP non-farm employment change figures were in focus late in the day.

In November, nonfarm employment increased by 307k, falling short of a forecasted 410k increase. In October, nonfarm employment had increased by 365k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Continental slid by 1.56%, with BMW and Volkswagen falling by 0.39% and by 0.44% respectively. Daimler rose by 0.24%, however, to buck the trend on the day.

It was a bullish day for the banks. Deutsche Bank rose by 0.90%, with Commerzbank ending the day up by 1.81%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.69% and by 1.67% respectively, with Soc Gen gaining 2.10%.

It was a mixed day for the French auto sector, however. Peugeot fell by 0.79%, while Renault rose by 1.45%.

Air France-KLM slipped by 0.85%, while Airbus SE rose by 2.15%, following Tuesday’s 1.90% gain.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX, after having fallen for 5 consecutive days. Following on from Tuesday’s 0.97% gain, the VIX rose by 1.93% to end the day at 21.17.

Disappointing ADP nonfarm figures had limited impact, while plans to retain the phase 1 trade agreement with China was market negative. On the positive, however, remained progress towards a COVID-19 vaccine and hopes of a stimulus package to support the U.S economy.

For the U.S markets, it was a mixed day after Tuesday’s gains and last month’s rally. The Dow and S&P500 rose by 0.20% and by 0.18% respectively, while the NASDAQ slipped by 0.05%.

VIX 031220 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include services and composite PMI numbers for Italy and Eurozone retail sales figures.

Finalized services and composite PMI figures for November are also due out for France, Germany, and the Eurozone.

We would expect the Eurozone’s composite and services PMI to have the greatest impact on the majors.

From the U.S, the all-important ISM services PMI and weekly jobless claims figures will also influence later in the day.

Away from the economic calendar, Brexit and COVID-19 news updates will need monitoring. Any further chatter on a stimulus package from Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 18 points.

For a look at all of today’s economic events, check out our economic calendar.

COVID-19 Vaccine Update – The UK Wastes No Time as MHRA Approves Vaccine

The Latest

BioNTech and Pfizer Inc. became the first pharma to have their mRNA COVID-19 vaccine approved on Wednesday.

The UK’s Medical & Healthcare Products Regulatory Agency (“MHRA”) became the first agency to approve a COVID-19 vaccine.

With the UK suffering at the hands of the COVID-19 pandemic, the independent regulator wasted little time.

The UK Government has pre-ordered 145 million doses of COVID-19 vaccines from Pfizer Inc., Moderna Inc., and AstraZeneca. Of the 145 million doses, the government has pre-ordered 40 million from BioNTech/Pfizer Inc.

With an efficacy rate of 95% and effective across all age groups, the first doses of the vaccine are due to arrive in days.

The UK Government announced that a first batch of 800,000 doses forms part of an expected 10 million doses by the end of the year.

With the vaccine coming in 2 doses, 5 million patients will receive inoculation if BioNTech/Pfizer Inc. delivers the full quota.

The Government’s Joint Committee on Vaccination and Immunisation (“JCVI”) affirmed on Wednesday that the first priorities should be the prevention of COVID-19 mortality and the protection of health and social care staff and systems.

The JVIC has given older adult residents in care homes the highest priority for vaccination, followed by care home workers.

Secondary priorities could include vaccination of those at increased risk of hospitalization and at an increased risk of exposure.

Logistics will now need to be in place to transport the vaccine, at -70C, for administration across the UK.

How the Markets Reacted

The FTSE100 rose by 1.23% on Wednesday, with the upside coming off the back of the MHRA announcement.

For the European majors, while it was a mixed day, the DAX30 and CAC40 came off lows in response to the news.

BioNTech SE share price rose by 6.21% in response to the news. Pfizer Inc. ended the day up by a more modest 3.51%.

While trailing Pfizer Inc. in the race to deliver a global vaccine, there was also support for AstraZeneca and Moderna Inc., which rose by 1.26% and by 1.41% respectively.

What’s next?

With UK regulators beating the FDA and the EU’s European Medicines Agency (“EMA”) to the punch, BioNTech/Pfizer Inc. will now need to deliver the doses.

There’s no trial run for BioNTech/Pfizer Inc. in terms of delivering the doses in a timely manner.

Both BioNTech/Pfizer Inc. and the government will likely face logistical challenges and the markets and governments from overseas will likely watch closely.

Successful distribution and administration of the first batch are now key. For the FDA and the EMA, both will have the benefit of the UK government’s experiences in distribution and vaccination.

The FDA is set to review the BioNTech/Pfizer Inc. vaccine on 10th December. In the New Year, the EMA review is due on 12th January.

Key areas of focus in the coming weeks will be production and distribution and geographical allocation.

The EU has pre-ordered 300 million doses of the BioNTech/Pfizer Inc. vaccine, with the U.S pre-ordering 100 million and an option for an additional 500 million doses.

BioNTech/Pfizer Inc. has projected between 5 million to 50 million doses to be available by the end of the year.

The UK is due to receive 10 million doses, which leaves 40 million assuming that 50 million doses are produced.

With the EU review of the vaccine not due until mid-January, that leaves the U.S and Japan in focus. While the U.S has pre-ordered 100 million, Japan has pre-ordered 120 million of the BioNTech/Pfizer Inc. vaccine.

Pressure may mount on the likes of the EMA to bring forward vaccine reviews. BioNTech/Pfizer Inc. may also feel increased pressure to deliver on the higher side of production forecasts…

Brexit Update – Talks Continue as EU Member States Keep an Eye on Barnier

The Latest

Brexit talks are continuing in London, after EU chief negotiator Barnier’s arrival at the start of the week.

The hot topics of debate remain the same in spite of talks having extended for months, if not years…

UK fisheries and a level playing field remain key sticking points for Britain and the EU.

As far as UK fisheries are concerned, French President Macron continues to take an uncompromising stance. With the presidential elections next year, a loss of access to UK fisheries would be a blow to Macron’s chances.

Losing complete access, in the event of a no-deal Brexit, would be a bigger blow to French fishermen, however.

For the Brexiteers and for Britain, continuing to give the EU access to UK waters makes no sense. Leaving the EU should translate into independence and control over its waters and borders.

Interestingly, the fishing industry contributes very little to the UK economy. In fact, when compared with contribution from trade and services, UK fisheries barely feature in economic reports. The fishing industry comes under agriculture which contributes less than 1% to the UK GDP.

By contrast, the manufacturing sector contributes closer to 20%, with Services more than 70% to GDP.

Therefore, standing firm on UK fisheries at the expense of an EU-Britain trade agreement will have a material economic impact. It’s hardly surprising that Bank of England Governor Bailey viewed Brexit as the greatest threat to the UK economy…

Ceding on UK fisheries, however, is not an option Boris Johnson.

UK Sovereignty in the Spotlight

A British government compromise on UK fisheries will question the entire concept of Brexit.

Back in 2016, those in favor of leaving the EU voted in order for Britain to recapture its independence and sovereignty.

The EU continues to miss the point on this front and continues to push to keep Britain tied to as many EU laws as possible.

With Brexiteer Boris Johnson at the helm, it remains unlikely for the British PM to give up too much ground.

While French President Macron is eyeing next year’s election, Boris Johnson also needs to keep the Tories united.

The British Pound

At the time of writing, the Pound was up by 0.03% to $1.34155 against the Dollar.

GBPUSD 021220 Daily Chart

The minor gain comes off the back of a 0.82% rally back to $1.34 levels for the 1st time since June 2018. That’s quite an achievement when considering the fact that the Pound was languishing at sub-$1.20 levels in March of this year.

It’s an even greater achievement when considering the hurdles that remain for negotiators to overcome in order to reach an agreement.

With Barnier in London, the EU is reportedly set to request updates and line of sight on negotiations before any actual agreement is made.

In recent weeks, we have heard Barnier talk of a willingness to compromise. Since then, however, EU President Ursula von der Leyen and a number of heads of stats have voiced concern.

The EU President’s message was clear that Brexit should not jeopardize the integrity of the EU Single Market. Macron and a number of others would likely argue that any EU compromise on access to UK fisheries would be just that.

In reality, however, more EU member states are likely to be worse off in the event of a no-deal Brexit than those which would benefit from unaltered access to UK fisheries.

From an economic perspective, therefore, the EU should be more than willing to give up the fight on UK fisheries.

The imbalances of power across the EU continue to be highlighted and remains the Achilles Heel of the EU Project.

Brussels is desperate to keep the EU Project afloat. But whether this at any cost remains to be seen. After all, Macron could be out next year. A populist government would find it hard to argue for unaltered access. It wouldn’t be very populist.

Looking Ahead

With the markets having made taken its position on the Brexit front, it now comes down to updates from the respective negotiating teams.

In recent months, the Pound has grown resilient to the strong-arming of the EU and negative chatter across the news wires.

It is crunch time, however. Following yesterday’s move through to $1.34 levels, a deal will need to be forthcoming to support further upside and a move through to $1.40 levels.

Support from the hope of an agreement does leave the Pound exposed to material downside risks, however.

A no-deal and this year’s current low of $1.14098 would have to be a starting point.

COVID-19 Vaccine Update – Moderna Inc. Requests Approval from the FDA and the EMA

Moderna Inc.

Moderna Inc. has submitted its request to the FDA for a EUA approval. With the FDA reviewing the Pfizer Inc. vaccine on 10th December, the Moderna Inc. review will take place on 17th December.

With the race to deliver a COVID-19 vaccine to the U.S and beyond continuing, it has become a two-horse race.

Both pharmas have gone down the same road on the virology front, delivering an mRNA vaccine. Until now, no regulator has reportedly approved such a vaccine.

With COVID-19 efficacy rates of between 94% and 95%, the FDA and other regulators will likely have little choice but to approve the vaccines.

Following impressive results from Pfizer Inc. and BioNTech, Moderna Inc.’s final results were as impressive. An efficacy rate of 94.1% and 100% effectiveness in preventing severe cases of COVID-19 were well received.

Assuming that the FDA approves both vaccines, Pfizer Inc. and Moderna Inc. are likely to deliver vaccines days after the approvals.

According to the European Medicines Agency (“EMA”), it has also received applications for COVID-19 vaccines from Pfizer Inc. /BioNTech and Moderna Inc.

The Agency’s human medicines committee has scheduled extraordinary meetings to conclude the evaluations. In terms of timelines, the scientific committee for human medicines (“CHMP”) will conclude its assessment during an extraordinary meeting scheduled for 12th January at the latest.

Production Projections

Since lodging EUA requests, both have provided details on vaccine production numbers for this year and the next.

Moderna Inc. expects to have 20 million doses of the vaccine available to the U.S by the end of this year. For next year, the target is to manufacture between 500 million and 1 billion doses globally.

BioNTech/Pfizer Inc. is aiming to deliver between 5 million and 50 million doses by year-end.

Both vaccines require two doses. This means that Moderna Inc. and BioNTech/Pfizer Inc. could inoculate as many as 30 million people by year-end.

The Centers for Disease Control and Prevention

On Tuesday, the CDC is due to meet in order to deliver prioritization advice to the U.S states.

Expectations are for the CDC to prioritize health-care workers and residents of long-term care facilities.

The recommendations will come ahead of a Friday deadline for U.S states to submit vaccine distribution plans to the Federal Government.

Once phase 1a of the prioritization is complete, the CDC will then deliver further priority recommendations.

European Equities: Economic Data and Brexit in Focus

Economic Calendar:

Tuesday, 1st December

Spanish Manufacturing PMI (Nov)

Italian Manufacturing PMI (Nov)

French Manufacturing PMI (Nov) Final

German Manufacturing PMI (Nov) Final

German Unemployment Change (Nov)

German Unemployment Rate (Nov)

Eurozone Manufacturing PMI (Nov) Final

Eurozone Core CPI (YoY) Prelim

Eurozone CPI (MoM) Prelim

Eurozone CPI (YoY) (Nov) Prelim

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bearish end to the month and the start of the week for the European majors on Monday. Coming off the back of a bullish week, the DAX30 and EuroStoxx600 fell by 0.33% and by 0.98% respectively. The CAC40 slid by 1.42%, however, to lead the way down.

On the day, a lack of progress towards Brexit and some profit-taking following an impressive November rebound left the majors in the red.

Inflation figures from the Eurozone and stats from the U.S didn’t help, however, with the stats skewed to the negative.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Prelim November inflation figures for Spain, Italy, and Germany were in focus on the day.

In Spain, consumer prices fell by 0.8% in November, compared with November 2019. In October, consumer prices had also fallen by 0.8%. The harmonized index of consumer prices fell by 0.9%, following a 0.9% decline in October. Economists had forecast a 0.8% decline, year-on-year.

Things were not much better from Italy, with consumer prices falling by 0.1% in November, month-on-month. In October, consumer prices had risen by 0.2%.

From Germany, deflationary pressures saw a marked pickup. Consumer prices slid by 0.8% in November, reversing a 0.1% rise from October. Economists had forecast a 0.7% decline.

From the U.S

Chicago PMI numbers for November and October pending home sales figures also disappointed.

The Chicago PMI fell from 61.1 to 58.2 in November, with pending home sales falling by 1.1% in October. In September, pending home sales had fallen by 2.0%.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Daimler rose by 0.32% to buck the trend on the day. Continental and Volkswagen slid by 2.35% and by 3.27% respectively, however, with BMW seeing a more modest 0.04% loss on the day.

It was also a bearish day for the banks. Deutsche Bank fell by 1.44%, with Commerzbank sliding by 3.38%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 1.96% and by 1.93% respectively. Soc Gen slid by 3.70% to lead the way down, however.

It was also a bearish day for the French auto sector. Peugeot fell by 1.13, with Renault sliding by 2.23%.

Air France-KLM also hit reverse, tumbling by 7.34%, with Airbus SE ending the day with a 2.52% loss.

On the VIX Index

It was a 5th consecutive day in the red for the VIX on Monday. Following a 1.93% decline on Friday, the VIX fell by 1.30% to end the day at 20.57.

On Monday, the Dow and S&P500 fell by 0.91% and by 0.46% respectively, with the NASDAQ slipping by 0.06%.

The downside for the VIX came in spite of the losses across the U.S benchmarks, with COVID-19 vaccine hopes weighing.

VIX 011220 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. November Manufacturing PMIs for Italy and Spain, and prelim Eurozone inflation figures for November are due out in the early part of the session.

German unemployment figures and finalized manufacturing PMIs for France, Germany, and the Eurozone are also due out.

Expect Italy, Germany, and the Eurozone’s manufacturing PMIs and Germany’s unemployment figure to have the greatest influence.

From the U.S, the market’s preferred ISM Manufacturing PMI for November will also provide direction late in the session.

Earlier in the day, China’s CAXIN Manufacturing PMI for November will set the tone following impressive NBS numbers on Monday.

Away from the economic calendar, Brexit and COVID-19 news updates will need monitoring. Any progress towards a stimulus package on Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the Dow was up by 15 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Month in Review – November 2020

The Majors

It was a particularly bullish month for the European majors in November, with COVID-19 vaccine news delivering a much-needed bounce.

After 2 consecutive months in the red, the CAC40 surged by 20.12%. The DAX30 and the EuroStoxx600 weren’t far behind, with gains of 15.01% and 13.73% respectively. For the DAX30, November’s gains reversed losses from the year to move into positive territory year-to-date. The CAC40 and EuroStoxx600 still have some way to go in order to reverse losses from earlier in the year, however.

While the news of a COVID-19 vaccine drove demand for riskier assets, Joe Biden’s victory in the Presidential Election added support for riskier assets.

On the negative side, however, was a reintroduction of lockdown measures by member states including France and Germany.

Towards the end of the month, the COVID-19 numbers reflected the effect of the lockdown measures.

In France, the number of new COVID-19 cases and hospitalizations were in decline allowing the government to ease lockdown measures going into December.

On the geopolitical risk front, last-ditch Brexit negotiations failed to deliver a deal, which left the majors in the red at the end of the month.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was a disappointing set of numbers for November.

Service sector activity contracted in France, Germany, and across the Eurozone as a result of a reintroduction of containment measures.

France’s services sector suffered the most, with the PMI tumbling from 46.5 to 38.0. With Germany’s Services PMI falling to 46.2, the Eurozone’s Services PMI fell from 46.9 to 41.3.

While Germany’s manufacturing sector avoided a contraction, sector activity in France contracted. The PMI fell from 51.3 to 49.1, dragging the Eurozone’s Composite PMI down from 50.0 to 45.1.

In spite of the disappointing numbers, hopes of a COVID-19 vaccine fuelled economic recovery fuelled muted the effect of the PMIs.

Other stats were mixed in the month.

Consumer and business sentiment weakened in October as a result of the 2nd wave of the pandemic and lockdown measures.

Germany’s ZEW Economic Sentiment Indicator fell from 52.3 to 32.8, with the Ifo Business Climate Index falling from 92.5 to 90.7.

Things were not much better on the consumer confidence front. The GfK Consumer Climate Indicator fell from -3.2 to -6.7.

For the Eurozone, consumer confidence also waned, with the Eurozone Consumer Confidence Index falling from -15.5 to -17.6.

On the positive front, however, were 3rd quarter GDP numbers for France, Germany, and the Eurozone. The respective economies had made progress in recovering from the 2nd quarter economic meltdown before November’s lockdown measures.

From the U.S

Labor market stats pointed to a stalling in the labor market recovery. Initial jobless claims inched up to 778k after having eased down to 709k in the 1st week of November.

While new COVID-19 cases surged across the U.S and a number of states reintroduced containment measures, COVID-19 vaccine news eased any market tensions in the month.

As a result of the jump in COVID-19 cases, consumer confidence softened in November. The CB Consumer Confidence Index fell from 101.4 to 96.1, with the Michigan Consumer Sentiment Index falling from 77.0 to 76.9.

On the positive, however, were private sector PMIs. Both the manufacturing and services sectors saw activity pick up in November.

In November, the Markit Manufacturing PMI rose from 53.4 to 56.7, with the Services PMI rising from 56.9 to 57.7.

The divergence from the Eurozone stemmed from a decision by the U.S administration to keep the economy running.

Monetary Policy

The ECB monetary policy meeting minutes, Economic Bulletin, and Financial Stability Review talked of doom and gloom.

From the minutes and other ECB reports and from ECB President Lagarde commentary, the markets are expecting further policy easing, however.

While the ECB minutes stated that there should be no commitments made, the 2nd wave COVID-19 pandemic is likely to force the ECB’s hands. It remains to be seen how far the ECB will go with a COVID-19 vaccine on the horizon.

From the FED, the FOMC meeting minutes also provided few surprises. Both central banks were focused on the effects of COVID-19 on their respective economies.

The respective minutes followed decisions by both to keep rates unchanged in the month.

The Market Movers

For the DAX: It was a bullish month for the auto sector in November. Daimler surged by 26.99%, with BMW and Continental jumping by 23.99% and by 24.73% respectively. Volkswagen trailed with a 12.52% gain in the month.

It was also a bullish month for the banks. Deutsche Bank rallied by 17.04%, with Commerzbank ending the month up by an impressive 28.8%.

From the CAC, it was a particularly bullish month for the banking sector. BNP Paribas surged by 43.95%, with Credit Agricole and Soc Gen ending the month with gains of 42.63% and 43.38% respectively.

It was also a bullish month for the auto sector. Peugeot rose by 28.06%, with Renault jumping by 56.94%.

Supported by COVID-19 vaccine news, however, it was Air France-KLM that impressed the most with a 77.94% rebound. Airbus SE also impressed, surging by 40.17%.

On the VIX Index

It was back into the red for the VIX in November, ending a run of 2 consecutive monthly gains. Reversing a 44.18% surge in October, the VIX tumbled by 45.90% to end the month at 20.57.

The downside for the VIX came as pharmas released impressive COVID-19 phase 3 clinical trial results. Talk of a vaccine being available by mid-December supported riskier assets, which sank the VIX.

In November, the Dow and NASDAQ rallied by 11.84% and by 11.80% respectively, with the S&P500 ending the month up by 10.75%.

VIX November Monthly Chart

The Month Ahead

We can expect another busy month ahead on the Eurozone economic calendar. Much of the economic data, however, will likely take a backseat in the month ahead.

We would expect COVID-19 vaccine updates and any progress towards a COVID-19 stimulus package on Capitol Hill to be key drivers.

On the geopolitical front, there’s also Brexit for the markets to consider. In late November, last-ditch talks failed to deliver an agreement. The two sides have just one month left until the end of the transition period.

Key stats that will draw interest, however, will include private sector PMIs for December, unemployment figures, and consumer and business sentiment numbers.

From the U.S, private sector PMIs, labor market numbers, and consumer confidence and spending will also influence.

There are also stats out of China that will need to continue reflecting China’s post-pandemic economic recovery.

Asia-Pacific Shares Down Across the Board; China Reports Upbeat Factory Activity

The major Asia-Pacific stock indexes closed lower on Monday as investors took profits and squared positions on the last day of trading in November. Traders showed little reaction to potentially bullish data from China showing a further expansion in the manufacturing sector. Trade frictions between Washington and Beijing may have also weighed on investor sentiment.

In the cash market on Monday, Japan’s Nikkei 225 Index settled at 26433.62, down 211.09 or -0.79%. South Korea’s KOSPI Index finished at 2591.34, down 42.11 or -1.60% and Hong Kong’s Hang Seng index closed at 26341.49, down 553.19 or -2.06%.

In China, the Shanghai Index settled at 3391.76, down 16.55 or -0.49% and in Australia, the S&P/ASX 200 Index finished at 6517.80, down 83.30 or -1.26%.

China’s Factory Activity Expands at Fastest Pace in Over Three Years

China’s factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.

Upbeat data released on Monday suggests the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis. It was also higher than the 51.5 median forecast in a Reuters poll of analysts.

Trump to Add China’s SMIC and CNOOC to Defense Blacklist:  Reuters, Citing Sources

The Trump administration is poised to add China’s top chipmaker SMIC and national offshore oil and gas producer CNOOC to a blacklist of alleged Chinese military companies, according to a document and sources, curbing their access to U.S. investors and escalating tensions with Beijing weeks before President-elect Joe Biden takes office.

Japan Oct Retail Sales Rise; Factor Output Grows for Fifth Month

Japanese retail sales rose 6.4% in October from a year earlier, up for the first time in eight months and matching a median market forecast, government data showed on Monday.

Japan’s industrial output rose for the fifth straight month in October signaling the economy was recovering further from the damage caused by the COVID-19 crisis.

Official data released on Monday showed factory output jumped 3.8% in October from the previous month, mainly due to strength in general machinery production and motor vehicle manufacturing.

The solid increase beat the median market forecast of a 2.1% rise in a Reuters poll of economists, and was in line with the prior month’s 3.9% gain.

Aussie Shares Tumble Amid Spat with China Over Hefty Wine Tariffs

Shares in Australia fell sharply on Monday after the country’s Treasury Wine Estates said it would divert hundreds of thousands of case of China-bound wine to other countries to avoid hefty tariffs, battering its shares as it acknowledged its future in its biggest market was unclear.

After Beijing imposed a 169.3% mark-up as part of an industry-wide anti-dumping investigation, the world’s largest listed winemaker said it would redirect sales of its prized Penfolds label to the U.S., Europe, elsewhere in Asia and domestically.

Treasury shares fell as much as 12% in early trade on Monday, against a slightly weaker broader market. The stock is down a third since China announced the anti-dumping investigation in August.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: The Futures Point South, with Stats on the Quieter Side

Economic Calendar:

Monday, 30th November

Spanish CPI (YoY) Prelim

Spanish HICP (YoY) (Nov) Prelim

Italian CPI (MoM) (Nov) Prelim

German CPI (MoM) (Nov) Prelim

Tuesday, 1st December

Spanish Manufacturing PMI (Nov)

Italian Manufacturing PMI (Nov)

French Manufacturing PMI (Nov) Final

German Manufacturing PMI (Nov) Final

German Unemployment Change (Nov)

German Unemployment Rate (Nov)

Eurozone Manufacturing PMI (Nov) Final

Eurozone Core CPI (YoY) Prelim

Eurozone CPI (MoM) Prelim

Eurozone CPI (YoY) (Nov) Prelim

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bullish end to the week for the European majors on Friday. The CAC40 rose by 0.56%, with the DAX 30 and the EuroStoxx600 ending the day with gains of 0.37% and 0.41% respectively.

Following a mid-week blip stemming from concerns over the state of the economy, the markets returned attention to vaccine news.

With the markets expecting a vaccine to become available by mid to late December, expectations of an economic rebound in early 2021 supported riskier assets.

News of easing restrictions also provided support. The CAC40 was the main beneficiary, which found additional support from news of falling new cases and hospitalizations in France.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Finalized 3rd quarter GDP, October consumer spending, and prelim November inflation figures from France were in focus.

The stats were skewed to the positive, providing the CAC40 with support through the early part of the session.

Consumer spending jumped by 3.7%, reversing most of a 4.4% slide from September. Consumer prices and the harmonized index of consumer prices both increased by 0.2% following a flat October. And finally, the French economy expanded by 18.7% in the 3rd quarter, which was revised up from a prelim 18.2%.

From the U.S

There were no material stats with the U.S markets on a half-day for Thanksgiving.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. BMW and Volkswagen fell by 0.83% and by 1.69% respectively. Continental and Daimler saw relatively more modest gains of 0.51% and 1.09% respectively, however.

It was a bullish day for the banks. Deutsche Bank and Commerzbank saw gains of 1.20% and 1.85% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.06%, with Credit Agricole and Soc Gen seeing more modest gains of 0.37% and 0.80% respectively.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 1.14% and 1.37% respectively.

Air France-KLM continued to find support, rallying by 4.82%, with Airbus SE eking out a 0.22% gain.

On the VIX Index

It was a 4th consecutive day in the red for the VIX on Friday. Following a 1.80% decline on Wednesday, the VIX fell by 1.93% to end the day at 20.84. Thursday was a public holiday in the U.S.

On Friday, the Dow and S&P500 saw gains of 0.13% and by 0.24% respectively, with the NASDAQ rising by 0.92%.

VIX 301120 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Prelim November inflation figures are due out from Spain, Italy, and Germany.

The numbers are unlikely to have a material impact on the European majors, with further ECB policy easing priced in.

From the U.S, Chicago PMI and pending home sales are due out. Expect the Chicago PMI to have a greater influence late in the session.

NBS private sector PMIs from China due out ahead of the European open will set the tone.

Away from the economic calendar, updates from Brexit negotiations from the weekend and COVID-19 news updates will also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 63 points, with the Dow down by 112 points.

For a look at all of today’s economic events, check out our economic calendar.

Couch Shoppers Expected to Make Cyber Monday Best Digital Shopping Day Ever

U.S. retailers opened their doors to Black Friday shoppers by offering steep discounts, but that didn’t help their sales numbers with social distancing practices and other measures put in place to mitigate infection risks likely driving down traffic. The good news is e-commerce sales reached a new record.

Black Friday Shopping in Stores Craters 52%

CNBC reported over the weekend that traffic at stores on Black Friday fell by 52.1% compared with last year, as Americans by and large eschewed heading to malls and queuing up in lines for shopping online, according to preliminary data from Sensormatic Solutions.

For the six key weeks of the holiday season this year, traffic in retail stores is expected to be down 22% to 25% year over year, an earlier forecast by Sensormatic Solutions said.

“We knew Black Friday [traffic] was going to be down, we just didn’t know how much it was going to be down,” said Brian Field, a senior director of global retail consulting at Sensormatic Solutions. “Shoppers are spreading out their shopping throughout the holiday season because of concerns about social distancing and the pandemic.”

Many malls looked bleak, and parking lots were more empty than full, across much of the country during the early hours of the morning Friday. Some reported traffic picking up later in the day, especially at outlet and open-air shopping centers, as some consumers felt more comfortable heading out. The warmer weather that blanketed much of the country also helped.

“Black Friday this year, from a traffic impact perspective, looked a lot like a typical Saturday after a Black Friday,” Field said.

Black Friday 2020 Online Shopping Surges 22% to Record $9 Billion – Adobe Analytics

Spending online on Black Friday this year surged nearly 22% to hit a new record, according to data from Adobe Analytics, as the Covid pandemic pushed more people to shop from the sofa and avoid crowded stores and malls.

Consumers spent $9 billion on the web the day after Thanksgiving, up 21.6% year over year, according to Adobe, which analyzes website transactions from 80 of the top 100 U.S. online retailers.

On Black Friday, Adobe found consumers spent $6.3 million per minute online, or $27.50 per person, on average. Spending on smartphones surged 25.3% year over year to reach $3.6 billion, representing 40% of total e-commerce spending.

This makes Black Friday 2020 the second-largest online spending day in history in the United States, behind Cyber Monday last year.

Retail Stock Investors Looking Forward to Cyber Monday

Despite the slow traffic at the malls on Friday, traditional brick and mortar stores may have been saved by robust online buying and curbside pickups. However, the most popular online sellers like Amazon and Etsy should continue to outperform on Cyber Monday.

According to Adobe Analytics, Cyber Monday (November 30) this year is slated to become the largest digital sales day ever, with spending reaching between $10.8 billion and $12.7 billion, which would represent growth of 15% to 35% from a year earlier.

For a look at all of today’s economic events, check out our economic calendar.

US Stocks: S&P Closes at Another Record Friday, Dow Finishes Over 30,000

The major U.S. stock indexes closed higher on Friday as investors wrapped up a holiday-shortened, but strong week amid fading political uncertainty over the presidential transition and positive vaccine news. Retailers also kicked off the Christmas shopping season with optimistic expectations despite record COVID-19 hospitalizations.

The benchmark S&P 500 reached a new closing high and the blue-chip Dow Jones Industrial Average finished above 30,000 for the first time ever. Meanwhile, the NASDAQ Composite outperformed the other majors as investors moved back into tech-related, market-leading stocks that have fared well throughout the pandemic, while economically sensitive cyclical stocks slowed gains.

In the cash market on Friday, the S&P 500 Index settled at 3638.15, up 8.70 or +0.26%, the Dow Jones Industrial Average finished at 29910.37, up 37.90 or +0.14% and the NASDAQ Composite closed at 12205.85, up 111.45 or +1.00%.

Rise in Optimism Sinks the VIX

A continuation in the rise of optimism underpinned prices on Friday as the environment for risk assets improved with the release of more positive COVID-19 vaccine data and political worries easing. This theme helped support the market throughout the week and month.

This led to a drop in put buying which pressured volatility. The CBOE Volatility Index (VIX), Wall Street’s preferred fear gauge, briefly dipped below 20 for the first time since late February. It later rebounded to trade at 20.84 near the end of the session.

Retailers Fared Well as Investors Bet on Strong Holiday Shopping Season

Retailers are counting on consumers to splurge after a tough year. But unemployment remains high, so money will be tight for some families that could threaten results. Nonetheless, there was an early encouraging sign from Adobe, which reported record online sales on Thanksgiving Day. Late Friday, it said online sales were on pace to hit another record on Friday, the company predicts Cyber Monday will continue to set a new bar.

Traders responded to the report by driving the SPDR S&P Retail ETF (XRT) higher by 0.9%, helping it reach a new all-time high. Etsy shares popped 10.7%, and GameStop advanced 9%. Amazon shares gained 0.3%, and Shopify climbed 1.5% after Adobe Analytics said Thanksgiving Day online sales rose to a record $5.1 billion.

Chipmakers Rise, Tesla Investors Shrug Off Negative News

Chipmaker stocks, which have been resilient throughout the global health crisis, once again outperformed the broader market.

Tesla Inc built on its recent rally with its shares advancing even as U.S. regulators opened an investigation into front suspension issues in about 115,000 Tesla vehicles.

Finally, shares of Walt Disney Co dipped after the company said it would lay off about 32,000 workers, up from the 28,000 announced previously. Jobs will be cut mainly at Disney’s theme parks.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Economic Data, COVID-19 Vaccine Updates, and Brexit in Focus

On the Macro

It’s a particularly busy week ahead on the economic calendar, with 88 stats in focus in the week ending 4th December. In the week prior, 50 stats had been in focus.

For the Dollar:

It’s a busy week ahead on the economic data front.

In the 1st half of the week, the market’s preferred ISM Manufacturing PMI and ADP Nonfarm Employment Change figures are due out.

With plenty of focus on labor market conditions, the ADP figures could overshadow the ISM numbers.

On Thursday, however, both the initial jobless claims and the ISM Non-Manufacturing PMIs will draw plenty of attention.

At the end of the week, nonfarm payrolls and November’s unemployment rate will provide riskier assets with direction.

Weak numbers could force the FED into action should lawmakers continue to grapple over a stimulus package.

Away from the economic calendar, COVID-19 and U.S politics will continue to remain the key drivers, however.

The Dollar Spot Index ended the week down by 0.65% to 91.790.

For the EUR:

It’s a busy week ahead on the economic data front.

Private sector PMIs for Spain and Italy and finalized PMIs for France, Germany, and the Eurozone are due out.

On Tuesday, German unemployment figures will also be in focus alongside the manufacturing numbers.

Mid-week, German retail sales figures are due out ahead of German factory order numbers on Friday.

Other stats in the week include prelim November inflation and Eurozone unemployment and retail sales figures.

These numbers are unlikely to have a muted impact on the EUR, however.

Away from the economic calendar, COVID-19 news updates will remain a key driver in the week. Expect Brexit to also influence…

The EUR ended the week up by 0.89% to $1.1963.

For the Pound:

It’s another relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs are due out on Tuesday and Thursday, with November’s construction PMI on Friday.

Barring any downward revisions, however, the stats are likely to have a muted impact on the Pound.

Sentiment towards Brexit and COVID-19 will remain the key drivers in the week.

The Pound ended the week up by 0.27% to $1.3311.

For the Loonie:

It’s a particularly busy week ahead on the economic calendar.

In the 1st half of the week, 3rd quarter and October GDP and RMPI numbers are in focus. Expect the GDP numbers to have the greatest impact.

The focus will then shift to trade and employment figures due out on Friday. Expect the employment numbers to have the greatest impact at the end of the week.

From elsewhere, private sector PMIs numbers from China, the Eurozone, and the U.S will also provide direction.

Away from the calendar, COVID-19 vaccine news and stimulus talk from Capitol Hill will also influence.

The Loonie ended the week up by 0.81% to C$1.2989 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead on the economic calendar.

AIG manufacturing index figures are due out ahead of 3rd quarter GDP numbers on Wednesday.

The focus will then shift to trade data and retail sales figures due out on Thursday and Friday.

On the monetary policy front, the RBA policy decision on Tuesday will also draw plenty of attention. While the markets are expected rates to be left unchanged, there could be the talk of further support via its bond-buying program.

From elsewhere, private sector PMI numbers from China will also influence.

Away from the economic calendar, COVID-19 news will continue to provide direction. U.S politics could also play a role should lawmakers make progress towards a stimulus package.

The Aussie Dollar ended the week up by 1.16% to $0.7387.

For the Kiwi Dollar:

It’s a relatively quiet week ahead on the economic calendar.

November business confidence figures at the start of the week will draw interest. With the RBNZ assuring continued support disappointing numbers would test Kiwi Dollar support.

Late in the week, building consent figures for October would likely have a muted impact on the Kiwi.

From elsewhere, private sector PMI numbers from China will also provide direction in the week ahead.

The Kiwi Dollar ended the week up by 1.41% to $0.7027.

For the Japanese Yen:

It is a relatively quiet week on the economic calendar.

October industrial production and retail sales figures are due out on Monday. Both sets of numbers will be of interest, though the impact on the Yen will likely be limited.

The focus will then shift to finalized manufacturing and services PMIs are due out on Tuesday and Thursday.

Barring marked deviation from prelim figures, however, the markets will likely brush aside the numbers.

From elsewhere, economic data from China will influence.

Away from the economic calendar, any further positive updates on COVID-19 vaccines would likely ease demand for the Yen.

The Japanese Yen ended the week down by 0.22% to ¥104.09 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead on the economic data front.

Private sector PMI numbers for November are due out in the week. The market’s preferred Caixin Manufacturing PMI on Tuesday will likely have the greatest impact.

Economic data from China has continued to impress. Any disappointing numbers would test market risk appetite early in the week.

The Chinese Yuan ended the week down by 0.23% to CNY6.55781 against the U.S Dollar.

Geo-Politics

U.S Politics

Following last week’s Thanksgiving holidays, the markets will look towards Capitol Hill. There will be two areas of focus. Firstly, any government interventions to curb the spread of the COVID-19 pandemic and, secondly, stimulus talks.

A failure to make progress on stimulus and reintroduction of lockdown measures would be the worst-case scenario for riskier assets.

Brexit

For the Pound and the UK economy, Brexit remains a key driver. Talks resumed on the weekend and time is rapidly running out.

With U.S President-Elect Biden also getting involved, the markets are hoping for an imminent deal.

COVID-19 Vaccine Update – Focus Shifts to Pre-orders and Distribution

Government Pre-Orders

Following the positive COVID-19 vaccine news in recent weeks, the focus has now shifted to vaccine distribution.

The Pfizer Inc. and BioNTech partnership continue to lead the way. They have made progress towards the required emergency approval and distribution.

Unsurprisingly, the wealthier countries have made pre-orders of COVID-19 vaccines that could leave 3rd world countries waiting on a vaccine for some time.

According to recent reports, the U.S, the UK, Japan, and Canada have over-ordered enough vaccine doses.

The Duke Global Health Innovation Center has released a breakdown of pre-ordered vaccines by country.  It doesn’t bode well for many nations.

Pre-Orders

Focussing purely on the 3 front runners, Pfizer Inc., Moderna Inc., and AstraZeneca, pre-orders are as follows:

  • The EU – 700 million doses: Pfizer Inc. (300 million) and AstraZeneca (400 million).
  • The US – 700 million doses: Pfizer Inc. (100 million); Moderna Inc., (100 million); and AstraZeneca (500 million). The U.S Government also has the option to order an additional 500 million doses from Pfizer Inc.
  • India – 500 million: AstraZeneca (500 million)
  • Japan – 290 million: Pfizer Inc. (120 million); Moderna Inc. (50 million); and AstraZeneca (120 million).
  • The UK – 145 million: Pfizer Inc. (40 million); Moderna Inc. (5 million); and AstraZeneca (100 million).
  • Indonesia – 100 million: AstraZeneca (100 million).
  • Brazil – 100 million: AstraZeneca (100 million).
  • Canada – 96 million: Pfizer Inc. (20 million); Moderna Inc. (56 million); and AstraZeneca (20 million).
  • Australia – 43.8 million: Pfizer Inc. (10 million) and AstraZeneca (33.8 million).
  • Egypt – 30 million: AstraZeneca (30 million).
  • Chile – 24.4 million: Pfizer Inc. (10 million) and AstraZeneca (14.4 million).
  • Argentina – 22 million: AstraZeneca (22 million).
  • Peru – 9.9 million: Pfizer Inc. (9.9 million).

Population Coverage

Based on these figures and assuming that all three vaccines receive approvals by the respective countries, Canada would have 127.7% population coverage. As previously mentioned, Japan (114.6%), the UK (108.7%), and the U.S (106.6%) have also ordered doses in excess of population numbers.

Other countries, however, fall short of the 100% mark. While Australia (87.6%) and the EU (78.2%) aren’t far off, other nations come woefully short.

Badly affected Brazil has only pre-ordered enough to inoculate 23.9% of the population. India, which has the 2nd highest number of cases, has pre-ordered equivalent to just 18.5% of the population.

Possible Outcomes

Governments of poorer nations are unable to pre-order in sizeable numbers. Additionally, poorer nations have looked to take advantage of AstraZeneca’s no profit pledge.

Many nations, therefore, have only pre-ordered from a single pharma. This could leave them without an effective vaccine should emergency approvals not be forthcoming.

The U.S, the UK, Japan, and Canada have spread their pre-orders across the 3 pharmas to avoid such an eventuality.

Other nations have not, with a number of highly populated, but poorer nations, placing orders only with AstraZeneca.

Last week’s concerns over AstraZeneca’s clinical trial results was all the more alarming when considering the demand for AstraZeneca’s vaccine.

In the wake of last week’s bad press, however, news has hit the wires that AstraZeneca is addressing issues raised.

AstraZeneca has announced that the vaccine will undergo a new global trial to address the concerns raised. That means, however, that any FDA approval will likely be delayed.

By contrast, the UK government has submitted a request to the MHRA to being the approval process. The AstraZeneca and University of Oxford partnership is a British bid to deliver a vaccine. A significantly lower price per dose and the ability to transport the vaccine at higher temperatures has driven demand from countries around the world. Failure to deliver will leave many nations without, which could lead to quite dire consequences.

It goes without saying that not all agencies responsible for approving vaccines are as strict as the likes of the FDA. That will be of some comfort for poorer nations.

Without the AstraZeneca Vaccine

For Britain and the U.S, removing AstraZeneca’s pre-orders would leave both short of inoculating their entire populations. The same is the case for Japan. In fact, only Canada would still have pre-orders that exceed the total population if AstraZeneca’s vaccine does not receive approval.

Things are far worse for countries such as Indonesia, India, and Brazil, however. These nations have only placed pre-orders with AstraZeneca.

The cost of both Pfizer Inc. and Moderna Inc.’s vaccines are significantly higher than that of AstraZeneca. This would likely lead to far lower vaccine coverage and leave the respective countries at the mercy of COVID-19. Only the wealthier population of these countries will be in a position to pay for the Pfizer Inc. vaccine for example.

As previously stated, Brazil has only pre-ordered doses to inoculate 23.9% of the population. India, which has the 2nd highest number of cases has pre-ordered equivalent to just 18.5% of the population. Indonesia has an 18.7% coverage, with pre-orders also only placed with AstraZeneca.

The Latest COVID-19 Numbers

Looking at the latest COVID-19 numbers, it begins to paint quite a grim picture.

At the time of writing, the total number of COVID-19 cases worldwide stood at 61,988,655. The U.S alone accounted for 13,454,346 cases, with cases in Brazil and India standing at 6,238,350 and 9,351,224 respectively.

Looking at the most affected EU member states, France, Spain, Italy, and Germany had a combined 6,407,853 cases.

When you include the UK’s 1,589,301, the total cases the total number of cases get much closer to 10 million.

Containment measures across the EU member states and the UK, however, have seen the number of new cases slow.

For the U.S, however, new cases continue to surge as is the case in other parts of the world.

Looking Ahead

As the markets continue to look ahead to the FDA meeting on 10th December, the AstraZeneca situation does also need consideration.

A delayed distribution of AstraZeneca’s vaccine to countries that have placed pre-orders will extend the lifespan of COVID-19.

New cases continue to surge. This had resulted in governments maintaining or reintroducing containment measures.

An extended containment period, due to the unavailability of an effective vaccine, will have even more catastrophic effects on the economies of nations awaiting the AstraZeneca vaccine.

The damage would not just be an economic one. The social impact could also be dire and may lead to more social and civil unrest.

It is, therefore, in the interest of all nations to support AstraZeneca’s global trial so that the pandemic does not continue to wreak havoc across the globe.

The Weekly Wrap – COVID-19 Vaccine News Supported Riskier Assets in the Week

The Stats

It was a quieter week on the economic calendar, in the week ending 27th November.

A total of 50 stats were monitored, following 62 stats from the week prior.

Of the 50 stats, 25 came in ahead of forecasts, while 21 economic indicators came up short of forecasts. 4 stats were in line with forecasts in the week.

Looking at the numbers, 16 of the stats reflected an upward trend from previous figures. Of the remaining 35 stats, 31 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive week in the red. The Dollar Spot Index fell by 0.65% to 91.790. In the week prior, the Dollar had fallen by 0.39% to 92.392.

Hopes of a COVID-19 vaccine before the end of the year provided riskier assets with support in the week. Softer demand for the Greenback came in spite of disappointing economic data from the U.S and the continued rise in new COVID-19 cases.

Out of the U.S

It was a busy week on the economic data front.

In the 1st half of the week, prelim private sector PMI numbers for November impressed. The all-important services PMI rose from 56.9 to 57.7, with the manufacturing PMI climbing from 53.4 to 56.7.

Consumer sentiment waned in November, however, with the CB Consumer Confidence Index falling from 101.4 to 96.1. This was to be expected, with the latest spike in new COVID-19 cases and dire labor market conditions.

Mid-week, the weekly jobless claims, core durable goods orders, 3rd quarter GDP, and personal spending figures were in focus.

The stats were mixed. Initial jobless claims rose from 742k to 778k in the week ending 20th November. The latest figure further confirmed that the labor market recovery had stalled.

Core durable goods orders impressed with a 1.3% rise in October, with personal spending rising by 0.5% to come in ahead of forecasts. Spending was down from a 1.2% rise in September, however.

2nd estimate GDP numbers for the 3rd quarter were in line with 1st estimates, which came up short of a forecasted upward revision.

Other stats ahead of the Thanksgiving holidays included finalized consumer sentiment and inflation figures.

The Michigan Consumer Sentiment Index came in at 76.9, down from a prelim 77.0. Of greater significance was softer inflationary pressures in October. The annual rate of inflation eased from 1.6% to 1.4%.

On the monetary policy front, the FOMC meeting minutes had a muted impact. The FED focus on the COVID-19 pandemic was somewhat dated following the latest COVID-19 vaccine updates.

In the equity markets, the NASDAQ rose by 2.96%, while the Dow and S&P500 gaining 2.21% and 2.27% respectively.

Out of the UK

It was a relatively quiet week on the economic data front.

Prelim private sector PMI numbers for November were in focus at the start of the week.

It was a mixed bag, with manufacturing sector activity seeing a pickup, while the services sector contracted.

The all-important services PMI slid from 52.3 to 45.8 as lockdown measures hit the sector.

Away from the economic calendar, the Pound did find some support on hopes of an imminent Brexit deal, however.

In the week, the Pound rose by 0.27% to $1.3311. In the week prior, the Pound had risen by 0.65% to $1.3275

The FTSE100 ended the week up by 0.25%, following on from a 0.56% gain in the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Prelim private sector PMIs for France, Germany, and the Eurozone were in focus at the start of the week.

With lockdown measures in place, the services sector took a hit, with the Eurozone Services PMI falling from 46.9 to 41.3.

Eurozone manufacturing sector activity eased as a result of a contraction in France, while Germany continued to report solid growth in the sector.

On Tuesday, the focus shifted to Germany. Finalized 3rd quarter GDP and November’s IFO Business Climate figures were in focus.

While an upward revision to 3rd quarter GDP numbers was positive, a slide in business sentiment disappointed. The Ifo Business Climate Index fell from 92.5 to 90.7.

The markets were expecting a deterioration in sentiment, however, which limited the impact on the EUR.

In the 2nd half of the week, Germany’s GfK Consumer Climate indicator reflected consumer sentiment towards the COVID-19 pandemic. A reintroduction of containment measures dragged the headline indicator down from -3.2 to -6.7.

From France, finalized 3rd quarter GDP, October consumer spending, and prelim inflation figures for November were in focus on Friday.

Consumer spending and inflation were the main areas of focus, with the markets less interested in 3rd quarter numbers in spite of an upward revision to 18.7%.

The stats were skewed to the positive, with consumer spending jumping by 3.7%, following a 4.4% slide in September.

Consumer prices were also on the rise. In November, consumer prices rose by 0.2%. Prices had been flat in October.

From the ECB, November’s financial stability review and monetary policy meeting minutes delivered a grim view. There was EUR resilience, however, coming from progress towards a COVID-19 vaccine.

For the week, the EUR rose by 0.89% to $1.1963. In the week prior, the EUR had risen by 0.19% to $1.1857.

For the European major indexes, it was another bullish week. The CAC40 rose by 1.86%, with the DAX30 and EuroStoxx600 gaining 1.51% and 0.93% respectively.

For the Loonie

It was a particularly quiet week on the economic data front.

There were no material stats to provide direction. The lack of stats left the Loonie in the hands of COVID-19 news updates and crude oil inventory numbers.

In the week ending 27th November, the Loonie rose by 0.81% to C$1.2989. In the week prior, the Loonie had risen by 0.32% to C$1.3095.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 27th November, the Aussie Dollar rose by 1.16% to $0.7387, with the Kiwi Dollar rallying by 1.41% to end the week at $0.7027.

For the Aussie Dollar

It was a relatively quiet week on the economic calendar.

Key stats included 3rd quarter construction work down and new capital expenditure figures.

The stats were skewed to the negative, with both taking a larger hit than expected in the quarter.

While the stats were disappointing, hopes of a COVID-19 vaccine by the end of the year delivered support.

For the Kiwi Dollar

It was a busier week on the economic calendar.

3rd quarter retail sales and October trade figures were in focus, with both sets of numbers beating forecasts.

Retail sales surged by 28%, reversing a 14.6% slide from the 2nd quarter, with the annual trade deficit widening to a 28-year high NZ$2,190m.

From the RBNZ, November’s Financial Stability report also delivered support to the Kiwi Dollar, while risks remained tilted to the downside.

For the Japanese Yen

It was a quiet week on the economic calendar.

November inflation figures at the end of the week failed to move the dial. A pickup in deflationary pressures was aligned with the market outlook. Tokyo’s core consumer prices fell by 0.7%, following a 0.5% decline in October.

While the inflation figures disappointed, updates on the COVID-19 vaccine eased demand for the Yen.

The Japanese Yen fell by 0.22% to ¥104.09 against the U.S Dollar. In the week prior, the Yen had risen by 0.74% to ¥103.86.

Out of China

It was a particularly quiet week on the economic data front.

There were no material stats to provide the Yuan with direction in the week.

In the week ending 27th November, the Chinese Yuan fell by 0.23% to CNY6.5781. The Yuan had risen by 0.66% to CNY6.5630 in the week prior.

The CSI300 rose by 0.76%, with the Hang Seng ended the week up by 1.68%.

European Equities: A Week in Review – 27/11/20

The Majors

It was another bullish week for the European majors in the week ending 27th November.

The CAC40 rose by 1.86% to lead the way, with the DAX30 and EuroStoxx 600 gaining 1.51% and 0.93% respectively.

Through the week, market reaction to positive COVID-19 vaccine news delivered support. Pfizer Inc. and BioNTech announced that a vaccine would be available in a matter of days after FDA approval.

The news of an imminent vaccine allowed investors to focus on an economic recovery rather than economic damage caused by the COVID-19 pandemic.

Mid-week, however, disappointing economic data from the U.S and doom and gloom from the ECB did pin the majors back.

At the end of the week, however, the focus returned to the COVID-19 vaccine, which supported a bullish end to the week.

The Stats

It was a busy week on the economic calendar.

At the start of the week, private sector PMI numbers disappointed. While Germany continued to see growth, numbers from France were particularly disappointing.

Weaker numbers led to a fall in the Eurozone’s composite PMI from 50 to 45.1, with service sector numbers doing the damage.

From Germany, 3rd quarter GDP numbers came in ahead of prelim figures, though had a muted impact.

With containment measures in place, a slide in business and consumer sentiment were negatives in the week.

At the end of the week, stats from France wrapped things up.

French consumer spending, inflation, and finalized 3rd quarter GDP numbers were in focus. The stats were all skewed to the positive providing support.

In October, consumer spending rose by 3.7%, reversing most of a 4.4% decline from September, with consumer prices on the rise in November.

Consumer prices rose by 0.2%, with the harmonized index for consumer prices also rising by 0.2%. Both had stalled in October.

For the French economy, the 3rd quarter GDP was revised up from 18.2% to 18.7%.

While the stats were positive, November’s private sector PMIs from earlier in the week supported the ECB’s plans to make a move next month.

From the ECB, November’s financial stability review and monetary policy meeting minutes pegged the majors back on Wednesday and Thursday. Doom and gloom and economic uncertainty ahead weighed on the COVID-19 vaccine optimism.

From the U.S

In the 1st half of the week, prelim private sector PMI numbers for November impressed. The all-important services PMI rose from 56.9 to 57.7, with the manufacturing PMI climbing from 53.4 to 56.7.

Consumer sentiment waned in November, however, with the CB Consumer Confidence Index falling from 101.4 to 96.1. This was to be expected, with the latest spike in new COVID-19 cases and dire labor market conditions.

Mid-week, the weekly jobless claims, core durable goods orders, 3rd quarter GDP, and personal spending figures were in focus.

The stats were mixed. Initial jobless claims rose from 742k to 778k in the week ending 20th November. The latest figure further confirmed that the labor market recovery had stalled.

Core durable goods orders impressed with a 1.3% rise in October, with personal spending rising by 0.5% to come in ahead of forecasts. Spending was down from a 1.2% rise in September, however.

2nd estimate GDP numbers for the 3rd quarter were in line with 1st estimates, which came up short of a forecasted upward revision.

On the monetary policy front, the FOMC meeting minutes had a muted impact. The FED focus on the COVID-19 pandemic was somewhat dated following the latest COVID-19 vaccine updates.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and Daimler saw gains of 6.45% and 1.68% while BMW and Volkswagen fell by 1.08% and by 3.19% respectively.

It was a bullish week for the banking sector, however. Commerzbank rallied by 8.52%, with Deutsche Bank ending the week up by 5.33%.

From the CAC, it was another bullish week for the banks. BNP Paribas and Soc Gen rose by 7.03% and by 7.24% respectively, with Credit Agricole rallying by 10.17%.

The French auto sector found more support. Peugeot ended the week up by 3.09%, with Renault rallying by 10.60%.

COVID-19 vaccine news delivered yet more gains for Air France-KLM, which jumped by 27.78%, while Airbus saw a more modest 1.53% gain.

On the VIX Index

It was back into the red for the VIX, marking a 3rd weekly decline in 4-weeks. In the week ending 27th November, the VIX fell by 12.07%. Reversing a 2.60% gain from the previous week, the VIX ended the week at 20.84.

For the week, the NASDAQ rose by 2.96%, while the Dow and S&P500 seeing gains of 2.21% and 2.27% respectively.

VIX 281120 Weekly Chart

The Week Ahead

It’s another busy week ahead on the Eurozone economic calendar.

November private sector PMIs for Italy and Spain are in focus, along with finalized PMIs for France, Germany, and the Eurozone.

Expect Italy’s PMI and the Eurozone’s composite PMI to draw plenty of interest barring revisions to German and French PMIs.

From Germany, employment, retail sales, and factory orders for October will draw also interest in the week. With German manufacturing sector activity holdings its ground, expect the employment and retail sales figures to have the greatest impact.

Other stats include prelim inflation figures for November, which would likely have a muted impact on the majors.

From the U.S, the market’s preferred ISM private sector PMIs, weekly jobless claims, and nonfarm figures will influence.

Out of China, manufacturing sector PMI numbers due out on Monday and Tuesday will also provide direction.

Away from the economic calendar, COVID-19 news updates and Brexit talks will also need continued monitoring.

Asia-Pacific Shares Rise on Upbeat Chinese Industrial Profits Data, Vaccine Hopes

The major Asia-Pacific stock indexes finished mostly higher on Friday with Australia bucking the trend as investors reacted positively to strong industrial profits from China for October. Traders showed little reaction to concerns over the Oxford-AstraZeneca vaccine candidate despite criticisms from U.S. experts on the results and methods used in their phase three vaccine trials.

In the cash market on Friday, Japan’s Nikkei 225 Index settled at 26644.71, up 107.40 or +0.40%. Hong Kong’s Hang Seng Index finished at 26894.68, up 75.23 or +0.28% and South Korea’s KOSPI Index closed at 2633.45, up 7.54 or +0.29%.

In China, the Shanghai Index settled at 3408.31, up 38.57 or 1.14% and Australia’s S&P/ASX 200 Index finished at 6601.10, down 35.30 or -0.53%.

China’s Industrial Profits Grow at Quickest Monthly Pace Since Early 2017

Profits at China’s industrial firms grew in October for a sixth consecutive month and at their quickest pace since early 2017, pointing to a steady recovery in the manufacturing sector after it was hard hit by the COVID-19 pandemic.

Profits at Chinese industrial firms surged 28.2% year-on-year in October to 642.91 billion yuan ($97.79 billion), National Bureau of Statistics (NBS) data showed on Friday, after rising 10.1% in September versus the previous year.

China Stocks End Higher to Post Weekly Gains on Upbeat Data

China stocks rose on Friday to post weekly gains, as upbeat profits from industrial firms pointed to a continued recovery in the world’s second largest economy amid the coronavirus outbreak.

UBS has set a target of 5,450 and 6,300 at end-2021 and end-2022, respectively, for the blue-chip CSI300 Index, adding mainland households could raise exposure to onshore equities in the next two years.

In other news, a spurt of missed debt repayments by three Chinese state-owned firms – a coal miner, a chipmaker and an automobile company – has shaken local markets and heightened speculation that a campaign to wean the economy off heavy credit is back.

South Korea Stocks Gain for Fourth Straight Week on Vaccine Hopes, Exports Outlook

South Korean shares ended higher on Friday, gaining for a fourth straight week, helped by a slew of potentially successful coronavirus vaccines on the table and an upbeat outlook for November exports.

South Korea’s exports likely bounced back in November and are expected to continue recovering for the time being, supported by strong chip sales and global demand, a Reuters poll showed on Friday.

The KOSPI has risen 19.83% so far this year, and gained 11.2% in the previous 30 trading sessions.

Foreigners Net Buyers of Japanese Stocks for Third Week in a Row

Foreign investors remained net buyers of Japanese equities for a third straight week that ended November 20, buoyed by progress in a second coronavirus vaccine-related developments that rekindled hopes of a swift global economic recovery.

Overseas investors were net buyers of stocks worth 597.17 billion yen ($5.74 billion) last week, after purchasing over 1 trillion yen in each of the previous two weeks, data from Japanese exchanges showed.

They bought 333.18 billion yen in cash equities markets and 263.99 billion yen worth of derivatives.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Futures Firm as Investors Bet on Strong Start to Holiday Shopping Season, Vaccine Hopes

The U.S. stock market was closed on Thursday for Thanksgiving but its weak performance on Wednesday served as a reminder that not everyone was in the mood to give thanks as mounting U.S. layoffs in the wake of new mandated lockdowns to contain surging COVID-19 infections dampened investor risk appetite.

Despite the grim labor market numbers, the early futures market trade shows investors remain optimistic about the economy with many looking forward to the start of the holiday shopping season on Friday, which could give the retail sector a much needed jolt, and the release of a coronavirus vaccine that could help stabilize the economy as early as the second quarter of 2021.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3629.65, down 5.76 or -0.17%, the blue chip Dow Jones Industrial Average finished at 29872.47, down 173.77 or -0.63% and the tech-based NASDAQ Composite closed at 12094.40, up 57.61 or +0.52%.

The price action the previous session suggests some investors may be reverting back to the allocation that powered the stock market from March to October with the S&P 500 Index and the Dow Jones Industrial Average retreating from record closing highs, pulled lower by cyclicals and small caps, and the pandemic-resilient tech and tech-adjacent market leaders helping the NASDAQ remain within striking distance of its all-time high.

The back and forth price swings this week also suggest we may not get a true Christmas rally in all investment categories with investors flipping their buys and sells between growth and value stocks. The market could struggle gaining traction as investors get pulled one-way by the fallout from the surge in COVID-19 cases and the other way by the positive vaccine developments.

“There’s a reality setting in that while the vaccine will start being distributed fairly quickly, the virus isn’t going away quickly and therefore the timeline for economic improvements is getting pushed out,” Tim Ghriskey, chief investment strategists at Inverness Counsel in New York said.

Longer-Term View Remains Bullish

Over the short- to medium-term, the main drivers of the price action are likely to be promising vaccine news, stay-at-home plays on pandemic realities and lack of new fiscal stimulus. However, the bias is likely to remain to the upside as investors become more optimistic about President-elect Joe Biden’s visions for ending the COVID-19 crisis, creating jobs and growing the economy.

Furthermore, the removal of uncertainties surrounding the U.S. presidential election helped drive Wall Street to record closing highs, and put the S&P 500 on course for its best November ever.

As further proof that investors have turned more optimistic post-election, a recent Reuters poll showed analysts believe the S&P 500 will gain 9% between now and the end of 2021. The index has surged about 66% since the coronavirus-led crash in March and is up about 12% so far this year.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Economic Data, COVID-19, and Brexit in Focus

Economic Calendar:

Friday, 27th November

French Consumer Spending (MoM) (Oct)

French CPI (MoM) (Nov) Prelim

French GDP (QoQ) (Q3) Final

French HICP (MoM) (Nov) Prelim

Eurozone Consumer Confidence Final

The Majors

It was a bearish day for the European majors on Thursday, though the losses were minor with the U.S markets closed. The EuroStoxx600 fell by 0.12%, with the DAX30 and the CAC40 declining by 0.02% and by 0.08% respectively.

Economic data from Germany and the ECB’s sentiment towards the Eurozone’s economic outlook pegged the majors back.

Mid-week, Germany announced plans to extend containment measures to further curb the spread of the coronavirus. While progress towards a COVID-19 vaccine remains positive for the markets, the economic damage stemming from the 2nd wave of the pandemic will need assessment.

The Stats

It was a quiet day on the Eurozone economic calendar. German consumer sentiment figures were in focus on the day.

In December, the GfK Consumer Climate Index fell from -3.1 to -6.7. Economists had forecast a rise to -2.5.

According to the GfK survey,

  • Sentiment in November took a hit as a result of the partial lockdown.
  • The shutdown of the hotel, restaurant, and events industry, as well as the tourism industry, weighed heavily on sentiment.
  • The economic expectation indicator fell by 7.3 points to -0.2, the lowest figure since -10.4 points in May.
  • Income expectations also took a hit, falling by 5.2 points to 4.6, with the propensity to buy indicator falling by 6.5 points to 30.5.

Monetary Policy

From the ECB, the monetary policy meeting minutes were in focus later in the day.

Some key points from the minutes included:

  • After a strong rebound in the summer, the euro area’s economic recovery was losing momentum.
  • The rise in COVID-19 cases and containment measures would restrict activity levels in high contact sectors.
  • There has been a clear deterioration in the near-term economic outlook as a result.
  • Household consumption is expected to remain subdued.
  • Increased uncertainty about the economic outlook and weaker balance sheets were weighing on business investment.
  • Headline inflation declined further to 0.3% in September, with inflation excluding energy and food falling to an all-time low of 0.2%.
  • The ECB expected headline inflation to remain negative through early 2021, longer than in the September baseline projection.
  • Risks surrounding the euro area growth outlook were clearly tilted to the downside.
  • The ECB held monetary policy unchanged ahead of a new round of macroeconomic projections due out in the coming weeks.
  • In December, it was felt necessary for a recalibration of all of its instruments, as appropriate, to ensure that financing conditions remain favorable to support the economic recovery. It was noted, however, that the ECB should not pre-commit itself to specific policy actions.
  • Finally, members agreed that an ambitious and coordinated fiscal stance remained critical and was the most effective policy to deal with the effects of the pandemic.

From the U.S

There were no material stats with the U.S markets closed for Thanksgiving.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Daimler fell by 2.48%, with BMW and Volkswagen declining by 2.08% and by 2.18% respectively. Continental saw a more modest 1.35% loss on the day.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 1.58% and by 0.38% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole slipped by 0.89% and by 0.47% respectively. Soc Gen fell by 1.21%, however, to lead the way down.

It was also a bearish day for the French auto sector. Peugeot fell by 0.73, with Renault sliding by 2.32%.

Air France-KLM continued to find support, rising by 1.94%, while Airbus SE fell by a further 1.86% following Wednesday’s 2.14% slide.

On the VIX Index

The U.S markets were closed on Thursday for Thanksgiving.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. French consumer spending for October and prelim inflation figures for November are due out. Finalized 3rd quarter GDP numbers are also due out on the day.

We would expect the markets to be relatively nonresponsive to the stats, however. The focus will be on COVID-19 news and Brexit news at the end of the week.

With progress made towards a COVID-19 vaccine, expectations are that containment measures will soon ease. This would support a pickup consumption and economic activity, limiting the impact of backward-looking data. The extent of the economic damage, however, will likely dictate the shape of any economic recovery.

Late in the session, Eurozone consumer confidence figures should also have a muted impact on the majors, barring any major revisions.

From the U.S, there are no material stats, with the U.S markets on a half-day for the Thanksgiving holidays.

Away from the economic calendar, expect COVID-19 news updates and Brexit to also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 32 points.

For a look at all of today’s economic events, check out our economic calendar.

COVID-19 Vaccine Update – AstraZeneca Leaves the Door Ajar for Other Pharmas

AstraZeneca and the University of Oxford

At the start of the week, yet more good news greeted the markets on the COVID-19 vaccine front.

AstraZeneca, teamed with the University of Oxford, announced an efficacy rate of 90% from phase 3 trials.

The devil was in the details, however. Efficacy rates varied depending upon the dosage regimen chosen. The average efficacy rate from the combined regimens was actually 70%.

While this was a particularly weak result, one dosage regiment did deliver a 90% efficacy rate. The dosage regimen would require a half does and then a full dose at least one month apart.

Of greater significance was the reported cost of production of the vaccine. Having already stated that there would be no profits derived from the vaccine, the vaccine is reportedly cheaper than a British cup of coffee.

By comparison, AstraZeneca’s dose is reported to cost around $2.50. Pfizer Inc.’s vaccine is expected to cost around $20 per dose and Moderna Inc.’s between $15 and $25.

Perhaps of even greater significance is the fact the vaccine can be stored at between 36F and 46F.

For Pfizer Inc. and Moderna Inc., the vaccine needs to be stored at particularly low temperatures that increase storage and transportation costs. Storage temperatures of as low as -90F for Pfizer Inc.’s vaccine also raise questions over global delivery.

Back in the Press but for the Wrong Reasons

Following the positive results from earlier in the week, AstraZeneca and the University of Oxford are back in the press. This time around, however, it’s for all the wrong reasons.

Questions have been raised over the vaccine trial methodology. Reports have surfaced that the dosage regimen delivering an efficacy rate of 90% excluding trial participants over the age of 55.

This means that AstraZeneca only included the “most at risk” in the 2nd dosage regiment that resulted in an efficacy rate of just 62%.

Also of concern is the fact that the efficacy rates varied by such a large degree depending upon dosage regimen. A half dose followed by a full dose delivered better results that raised further question markets over clinical trial parameters.

In terms of credibility, things couldn’t get much worse for the partnership. The more effective half dose/full dose regimen was actually in error.

The loss of credibility and lack of trial data for the over 55s in the 90% efficacy rate dose regimen raises too many unknowns for government agencies such as the FDA to approve a EUA.

It’s therefore unsurprising that AstraZeneca has seen its share price fall from a Monday high £83.24 to a Wednesday low £78.00. That’s a 6.3% slide peak to trough in response to the negative news. On Wednesday, AstraZeneca ended the day at £78.08.

The Latest COVID-19 Numbers

At the time of writing, the total number of COVID-19 cases worldwide stood at 60,719,957. The U.S alone accounted for 13,137,692 cases, with India accounting for 9,266,705.

Looking at the most affected EU member states, France, Spain, Italy, and Germany had a combined 6,257,334 total number of cases. Back in mid-September, the 4 member states had a combined total of less than 1 million.

When you include the UK’s 1,557,007 total cases the total number of cases gets much closer to the 10 million mark.

Containment measures across the EU member states and the UK, however, should see the number begin to plateau.

For now, it is a different story for the U.S, which has yet to reintroduce nationwide containment measures.

When considering the U.S numbers, both Pfizer Inc. and Moderna Inc. will likely be inoculating the U.S before many other nations.

Looking Ahead

The markets are now in wait-and-see mode, as the FDA prepares to review clinical trial results on 10th December.

Between now and then, updates on production capacity and logistics will be watched closely.

There is one other factor for the markets to consider, however.

Governments have preordered from Pfizer Inc. and Moderna Inc. and other pharmas. When considering the size of orders from both the U.S and from the EU and Japan, it may take some time for vaccines to reach other countries.

This could lead to a global economic decoupling, which would raise questions over the market optimism of a 1st quarter economic rebound.

The Department of Health and Human Services and the Department of Defense have reportedly ordered 100 million doses of the Pfizer Inc. and BioNTech SE vaccine. An option for an additional 500 million doses is also available.

The EU has reportedly pre-ordered 200 million doses of Pfizer Inc.’s vaccine.

Pfizer Inc. has reportedly announced plans to produce 50 million doses by the end of this year. The company then has a target of producing 1.3 billion doses for next year.

Pre-orders for Pfizer Inc. alone, alongside manufacturing targets, certainly suggest the need for 2 or even 3 other vaccines.

With AstraZeneca and the University of Oxford vaccine trial results now in question, the door is now ajar for the likes of Johnson & Johnson and Novavax to play catch up.

As mentioned earlier, once the emergency approvals are in place, vaccine production will be the next area of focus.

Brexit – A New President Who Just Doesn’t Think Like Donald

The Lay of the Land

As the end of the Brexit transition period nears it is hardly surprising that Brexit news coverage has seen a sharp increase.

Through October and early November, U.S politics had been center stage. But, with Boris Johnson’s close ally, Donald Trump making way for President-Elect Joe Biden, the British PM may be feeling somewhat isolated…

Since prior to the Presidential Election, Biden had made his position clear vis-à-vis trade with Britain.

Placing the Good Friday Agreement in jeopardy would put any trade talks with the U.S on hold. This was perhaps not the early Biden message that Johnson was looking for. There was always a risk in introducing the Internal Market Bill, particularly with Joe Biden ahead in the polls.

The greater risk, however, was waiting for the U.S Presidential Election to take place before looking to conclude talks.

From an EU perspective, there was nothing to lose by waiting. Trump remaining in office would have been status quo. A Biden victory, however, would have shifted the pressure onto Britain.

As Britain and the EU enter what could be the last round of talks, Biden has already reportedly spoken to Johnson. Biden stance was unchanged. There should be no north and south hard border in Ireland.

The EU and Biden vs Boris and the Brexiteers

To be frank, however, this is the least of Boris Johnson’s worries. Demands from the EU of continued access to UK fisheries and agreeing to EU rules to ensure a level playing field are two major headaches.

Britain has left the EU, yet the EU is clearly making demands that would undermine a clean break for Britain.

Throw in the EU’s demand to review any Brexit deal in 10 to 15 years and it just gets worse. The British negotiating team was perhaps taking enough risk by counter offering a 3 to 5-year review.

It’s hardly surprising that a number of MPs, including Michael Gove, were up in arms over the EU’s latest demand.

Compromise or Stand firm?

Over the last few weeks, there had been the talk of the EU being willing to compromise to close out a deal.

Following EU President Ursula von der Leyen’s comments this week, however, the willingness may have waned.

As EU Chief Negotiator Barnier prepares to come out of self-isolation, there was a warning for the Brits. If the UK fails to change its stance on the outstanding issues, there’s no point for talks to resume.

The EU President had spoken this week, saying that a deal should not compromise the EU single market.

When considering the fact that the EU would lose all access to UK fisheries in a no-deal scenario, a no Brexit outcome would also compromise the EU single market. So, while the EU is pressing for Britain to change its stance, it is still hard to imagine that Johnson would yield on this issue.

Reduced access would be a must as optically anything status quo post-Brexit makes Brexit a pointless exercise…

The British Pound

At the time of writing, the Pound was up by 0.10% to $1.33897 against the Dollar. Recovering from losses from earlier in the day, yesterday, the Pound is eying $1.34 levels and a 5th consecutive daily gain.

When considering the level of uncertainty over Brexit, hope has certainly come at the right time.

Perhaps Joe Biden’s pressure on Johnson to reach an agreement with the EU has been instrumental in the Pound’s revival.

After all, a trade agreement with the U.S has always been the carrot to lure voters into siding with the Brexiteers. Failure to win over Joe Biden and the Democrats would be a disaster for Johnson, the Tories, and the UK economy.

So, when considering the Pound’s current move back towards September’s current year high of $1.3483, we could see a breakout from $1.35 levels if all goes well.

Failure to reach an agreement not only leaves Britain without a trade agreement with the EU but also with the U.S.

Political uncertainty will undoubtedly return to sit alongside economic uncertainty near-term. It just isn’t the right time to have so much uncertainty with the UK economy plagued by the COVID-19 pandemic.

A return to sub-$1.20 levels, last visited in March of this year, would certainly be a reasonable starting point. We may then begin to hear of Dollar parity with the Pound. In 1985, the Pound had slumped to $1.05 against the Dollar.

Britain out in the cold and a new low will be on the cards…

Looking Ahead

The markets will need to receive some good news over the remainder of this week to support the Pound’s current levels.

Both sides will need to show a willingness to compromise on UK fisheries, EU rules to ensure a post-Brexit level playing field, and a 10-year Brexit review.

For Boris Johnson, however, there may need to be a greater willingness if he wants a U.S trade agreement to follow. Sadly for the British government, the EU is all too aware of Biden’s stance. So, the ball may well be back in Britain’s court to deliver.

What a catastrophe it would be for the Brexiteers if a compromise on all of the above is the only way forward.

European Equities: Brexit, Economic Data, and the ECB Minutes in Focus

Economic Calendar:

Thursday, 24th November

GfK German Consumer Climate (Dec)

ECB Publishes Account of Monetary Policy Meeting  

Friday, 25th November

French Consumer Spending (MoM) (Oct)

French CPI (MoM) (Nov) Prelim

French GDP (QoQ) (Q3) Final

French HICP (MoM) (Nov) Prelim

Eurozone Consumer Confidence Final

The Majors

It was a mixed day for the European majors on Wednesday. The CAC40 rose by 0.23%, while the DAX30 and the EuroStoxx600 slipped by 0.02% and by 0.08% respectively.

A planned easing of containment measures provided support to the European majors on the day. While Germany will reportedly allow gatherings for Christmas, France will begin to ease lockdown measures this weekend. The more aggressive plans to ease containment measures in France delivered the upside for the CAC40.

From the U.S, a continued surge in new COVID-19 cases and disappointing economic data weighed on the day, however.

The Stats

It was a quiet day on the Eurozone economic calendar. French jobseeker figures were in focus in the early part of the session.

In October, the total number of jobseekers decreased from 3,606.3k to 3,549.7k. Coupled with progress towards a COVID-19 vaccine, the numbers supported the CAC40.

From the ECB, the Financial Stability Review also failed to move the dial.

Salient points from the review included:

  • The coronavirus pandemic, and its impact on macroeconomic prospects as well as sovereign, corporate, and household balance sheets, continue to dominate the outlook for euro area financial stability.
  • Near-term financial stability risks are contained by massive policy impact. A premature end to schemes could challenge corporates and households, however.
  • Medium-term vulnerabilities have increased with rising debt burdens. Euro area banks, which have shown resilience so far, face a combination of growth asset quality concerns, persistent structural problems, and ongoing pressures on profitability.
  • Macroprudential policy must continue to focus on leaning against undue deleveraging, supporting capital buffer usability, and developing an effective framework for the non-bank financial sector.
  • The euro area economy faces a fragile and uneven recovery, notwithstanding considerable policy support.
  • Downside risks that remain include an adverse outcome of Brexit negotiations. On the plus, the availability of a vaccine in the near future may help the euro area return to pre-pandemic levels of economic activity faster.

From the U.S

It was a particularly busy day on the economic data front. Key stats included the weekly jobless claims, core durable goods, 3rd quarter GDP, and personal spending figures.

In the 3rd quarter, the economy expanded by 33.1%, according to the 2nd estimate figures. This was in line with the 1st estimate while coming up short of a forecasted 33.2%.

Core durable goods orders rose by 1.3% in October, following a 1.5% increase in September. Economists had forecast a 0.5% rise.

Personal spending followed a 1.2% increase in September with a 0.5% rise in October. Economists had forecast a 0.4% rise.

On the employment front, initial jobless claims stood at 778k in the week ending 20th November. This was up from the week prior’s 742k and was another signal that the labor market recovery was stalling.

The FED

From the FED, the FOMC meeting minutes were released after the European close, which was focused heavily on the effects of the COVID-19 pandemic.

Salient points from the Committee Policy Action section included:

  • Economic activity and employment had continued to recover but remained well below their levels at the beginning of the year.
  • Weaker demand and earlier declines in oil prices had been holding down consumer price inflation.
  • The FED was committed to using its full range of tools to support the U.S economy in this challenging time.
  • Members stated that the path of the economy would significantly depend on the course of the virus.
  • Additionally, members agreed that the ongoing health crisis would continue to weigh on economic activity, employment, and inflation in the near-term. This was posing considerable risks to the economic outlook over the medium-term.
  • Members expected to maintain an accommodative stance on monetary policy until inflation moved moderately above 2% and maximum employment was achieved.
  • Over the coming months, it would be appropriate for the FED to increase its holdings of Treasury Securities and agency MBS.
  • The FED would continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance on monetary policy as appropriate.
  • Considerations would include readings on public health, labor market conditions, inflation pressures, and expectations, and financial and international developments.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Volkswagen slid by 2.43% to lead the way down, with BMW and Daimler seeing losses of 1.69% and 1.24% respectively. Continental ended the day down by a more modest 0.46%.

It was also a bearish day for the banks. Deutsche Bank fell by 1.06%, with Commerzbank sliding by 2.85%.

From the CAC, it was a relatively bullish day for the banks. Credit Agricole and Soc Gen rose by 0.53% and by 0.93% respectively. BNP Paribas eked out a 0.05% gain on the day.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 0.63% and 0.22% respectively.

Air France-KLM followed Tuesday’s 11.07% surge with a 2.1% gain, while Airbus SE slid by 2.14%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Wednesday. Following a 4.50% decline on Tuesday, the VIX fell by 1.80% to end the day at 21.25.

The downside for the VIX came in spite of the Dow and S&P500 seeing red on Wednesday. Disappointing economic data from the U.S left the pair in the red for the day.

On Wednesday, the Dow and S&P500 fell by 0.58% and by 0.16% respectively, while the NASDAQ rose by 0.48%.

VIX 261120 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. German GfK Consumer Climate figures for December are due out later this morning.

With progress towards a COVID-19 vaccine, however, the DAX30 will likely be resilient to today’s numbers.

From the ECB, the ECB monetary policy meeting minutes will draw interest later in the day, however.

With the ECB assuring more support next month, the markets will be looking for some guidance on what to expect.

From the U.S, there are no material stats, with the U.S markets closed for Thanksgiving.

Away from the economic calendar, expect COVID-19 news updates and Brexit to also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 0.50 points.

For a look at all of today’s economic events, check out our economic calendar.