Stock Head South as Trader’s Focus on U.S. Tax Vote

European stock markets headed south, despite stronger than expected PMI readings out of the Eurozone and the U.K. The Tech Selloff, which seemed to abate during the Asian session, resumed with force in Europe as investors eye the progress of U.S. tax reform plans, after the Senate suspended voting on the bill until Friday, after a key compromise to win a majority collapsed. Markets seemed to stabilize during the Asian session and Nikkei and ASX managed to close higher, but Hang Seng and CSI 300 remained under pressure after a dip in China’s Caixin manufacturing PMI. In Europe investors shrugged off a good data round an index are broadly higher, with the FTSE 100 the main outperformer amid a weaker pound.

The Eurozone manufacturing PMI was revised up to 60.1 in the final reading from 60.0 reported initially and versus 58.5 in the previous month. This is the best performing since the height of the dot-com boom over 17 years ago and Markit reported that growth of output and new orders climbed to multi-year highs and supported survey-record job creation. PMI readings in Germany, the Netherlands, Austria and Ireland are at or near to record highs and the upswing was broad based across the Eurozone, with all countries surveyed reporting expansion for the sixth straight month. There is also a sharp uptrend in business investment on machinery as companies running into capacity constraints, which suggests that there is optimism that the boom will continue well into 2018. At the same time Markit reported a further build up of price pressures with output charges rising at the quickest pace since June 2011.

UK Manufacturing PMI Hit a 52-month High

U.K. manufacturing PMI hit a 52 month high in November. The U.K. CIPS manufacturing PMI came in higher than expected at a 52-month high of 58.2, with output, new orders and employment all expanding at a faster rate. Investment goods new orders, in particular, were strong and increased at the fastest pace since August 1994. Solid domestic demand and steeper gains in new export business underpinned the improvement.

Germany waiting for decision on possible coalition talks after SPD-CDU meeting. After Chancellor Merkel and SPD head Schulz met President Steinmeier Thursday, expectations are running high that Schulz may modify his strict “no” to a repeat of the grand coalition, although as the previous coalition talks with FDP and Green Party showed, the start of talks doesn’t necessarily mean that parties are able to come to an agreement. A Bild survey suggested only 22% of voters want a continuation of the coalition between SPD and CDU and within the SPD there is also a lot of resistance and if Schulz puts the final decision to a vote among party members, a positive vote is not secured.