The Weekly Wrap: New COVID-19 Stain Unravels the Market’s Pandemic Recovery
It was a busier week on the economic calendar, in the week ending 26th November.
A total of 50 stats were monitored, which was down from 60 stats in the week prior.
Of the 50 stats, 29 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. There were 4 stats that were in line with forecasts in the week.
Looking at the numbers, 27 of the stats reflected an upward trend from previous figures. Of the remaining 23 stats, all 23 reflected a deterioration from previous.
For the Greenback, it was a 5th consecutive week in the green. Market reaction to FED Chair Powell’s reappointment and rising new COVID-19 cases in Europe had delivered Dollar demand. A 0.73% slide on Friday reversed the gains, however, as the markets responded to the news of the new COVID-19 strain and containment measures. In the week ending 26th November, the Dollar Spot Index rose by 0.04% to 96.071. In the previous week, the Dollar had risen by 0.95% to 96.031.
Out of the U.S
Early in the week, prelim private sector PMIs were in focus, with the numbers skewed to the negative.
While the manufacturing PMI rose from 58.4 to 59.1, the all-important services PMI declined from 58.7 to 57.0. As a result, the Composite PMI fell from 58.7 to 57.0.
Ahead of the Thanksgiving holidays, a particularly busy set of numbers also drew plenty of interest.
Personal spending rose by 1.3%, with jobless claims falling from 270k to 199k in the week ending 19th November.
Core durable goods orders were also positive, rising by 0.5% in October, with inflationary pressures picking up once more.
The FED’s preferred core PCE price index rose by 4.1%, year-on-year in October. In September, the index had risen by 3.7%.
GDP numbers for the 3rd quarter fell short of estimates, however. In the 3rd quarter, the economy expanded by 2.1%, falling short of a forecasted 2.2%. The economy had expanded by 6.7% in the previous quarter.
Out of the UK
It was a relatively busy week, with prelim private sector PMIs and industrial trend orders in focus.
The stats were skewed to the positive, with the all-important services PMI rising from 54.6 to 58.6. Manufacturing sector activity also picked up, with the PMI up from 54.1 to 57.7.
Also positive was a marked increase in the CBI Industrial Trend Orders, which increased from 9 to 26 in November.
COVID-19 woes weighed, however, muting the impact of the positive numbers
In the week, the Pound declined by 0.85% to end the week at $1.3337. In the week prior, the Pound had risen by 0.28% to $1.3451.
The FTSE100 ended the week down by 2.49%, following a 1.69% loss from the previous week.
Out of the Eurozone
Early in the week, consumer confidence and prelim November private sector PMIs were in focus.
Rising new COVID-19 cases weighed on consumer sentiment, with the Eurozone consumer confidence index falling from -4.8 to -6.8.
Private sector PMIs for November were positive, however.
A pickup in service sector activity across France and German led to a rise in the Eurozone’s services PMI from 54.6 to 56.6. French manufacturing sector activity also picked up, while Germany’s held steady, supporting an increase in the Eurozone Composite PMI from 54.2 to 55.8.
The rest of the numbers were skewed to the negative, however, with the German economy in the spotlight.
German business sentiment waned in November, with the Ifo Business Climate Index falling from 97.7 to 96.5.
It wasn’t much better for consumers. Consumer sentiment took a hit, with the GfK Consumer Climate Indicator for December falling from 1.0 to -1.6.
German GDP numbers also disappointed.
In the 3rd quarter, the German economy expanded by 1.7% quarter-on-quarter, according to 2nd estimate figures. This was down from a prelim 1.8% and a 2nd quarter 2.0%.
For the week, the EUR rose by 0.24% to $1.1317. In the week prior, the EUR had slumped by 1.35% to $1.1290.
The DAX30 slid by 5.59%, with the CAC40 and the EuroStoxx600 ending the week with losses of 5.24% and 4.53% respectively.
For the Loonie
There were no major stats to consider, leaving the Loonie in the hands of market risk sentiment and crude oil prices.
In the week ending 26th November, the Loonie declined by 1.19% to C$1.2791. In the week prior, the Loonie had fallen by 0.72% to C$1.2640.
The Aussie Dollar fell by 1.55% to $0.7123, with the Kiwi Dollar sliding by 2.60% to end the week at $0.6822.
For the Aussie Dollar
Private new CAPEX and retail sales were in focus.
In the 3rd quarter, private new CAPEX fell by 2.2% after having risen by 4.4% in the previous quarter. While negative for the quarter, forecasts for 2021/22 were raised, limiting the damage.
Retail sales were also upbeat, supported by the reopening. In October, retail sales jumped by 4.9% after having risen by 1.3% in September.
Market reaction to COVID-19 news late in the week sank the Aussie, however.
For the Kiwi Dollar
Retail sales and trade data were in focus on the economic data front.
In the 3rd quarter, retail sales slid by 8.1% quarter-on-quarter, reversing a 3.3% increase from the previous quarter. The impact on the Kiwi was muted, however, with the slide stemming from the latest lockdown.
Trade data for October was upbeat, however. New Zealand’s trade deficit narrowed from NZ$2,206m to NZ$1,286m.
The numbers were not enough to prevent a reversal, however, with RBNZ monetary policy doing the damage.
On Wednesday, the RBNZ lifted cash rates by 25pbs to 0.75%. Market participants were expecting a bigger move, which ultimately led to the slide in the Kiwi Dollar.
The slide in the Kiwi came in spite of the RBNZ statement highlighting the need for a continued tightening of policy.
Ultimately, however, it was news of the new COVID-19 strain that did the damage.
For the Japanese Yen
Private sector PMIs and inflation were on focus, with the stats skewed to the positive.
In November, Japan’s manufacturing PMI rose from 53.2 to 54.2, with the services PMI up from 50.7 to 52.1.
There was also a pickup in inflationary pressure. In November, Tokyo’s core annual rate of inflation accelerated from 0.1% to 0.3%.
The stats had a muted impact on the Yen, however, with the new COVID-19 strain and government measures in Europe and beyond to prevent the spread driving demand for the safe haven.
The Japanese Yen rose by 0.54% to ¥113.38 against the U.S Dollar. In the week prior, the Yen had fallen by 0.09% to ¥113.990.
Out of China
There were no material stats to provide the markets with direction.
On the monetary policy front, the PBoC left loan prime rates unchanged, which was in line with market expectations.
In the week ending 26th November, the Chinese Yuan fell by 0.10% to CNY6.3933. In the week prior, the Yuan had ended the week down by 0.12% to CNY6.3871.
The CSI300 slipped by 0.61%, with the Hang Seng sliding by 3.87%.