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Stocks Start the Month Strong, But No Downside Breakout in Dollar Yet

Yen and Dollar are generally softer today as markets open December on firm footing. Australia Dollar is following as third weakest as diplomatic tension with China worsens. On the other hand, Euro is leading Swiss Franc higher. Manufacturing data from China and UK indicate sustainable recovery for now, while Eurozone PMIs were not too disastrous. Focus will turn to US ISM manufacturing.

Technically, however, there isn’t much new development. Euro is held below 1.2011 resistance against Dollar, 125.13 resistance against Yen and 0.9004 resistance against Sterling. EUR/CHF is also staying below 1.0877 resistance. There is no confirmation of Euro’s underlying bullish momentum yet. Dollar, on the other hand, is held above 0.7413 support against Aussie, 0.8982 support against Swiss and well above 103.17 support against Yen. There is no confirmation of selloff resumption in Dollar neither. We’ll have to be patient.

In other markets, currently, FTSE is up 1.83%. DAX is up 0.85%. CAC is up 0.92%. German 10-year yield is up 0.0088 at -0.560. Earlier in Asia, Nikkei rose 1.34%. Hong Kong HSI rose 0.86%. China Shanghai SSE rose 1.77%. Singapore Strait Times rose 0.29%. Japan 10-year JGB yield dropped -0.0084 to 0.022.

ECB Schnabel: It’s appropriate to preserve financing conditions rather than ease much further

Regarding the upcoming policy recalibration, ECB Executive Board member Isabel Schnabel said it’s “appropriate to focus on preserving” the financing conditions, “rather than easing much further”. She emphasized, “if it’s necessary to do something that doesn’t meet market expectations, we have to do that nevertheless.”

“I indeed hope this will be the last big push (on monetary stimulus”, but we can never know what’s going to happen,” she said. “There is a positive scenario where we get a swift recovery and the scarring is relatively limited. But there is also the risk of the crisis being more protracted.”

She’s open to extending the PEPP window by 12 months to June 2021. On the topic of further rate cut, “there is no technical reason why this could not be lowered,” she said. “The question is whether this is considered appropriate.”

Eurozone PMI manufacturing finalized at 54.8, a brighter outlook indicated by upturn in optimism for year ahead

Eurozone PMI Manufacturing was finalized at 53.8 in November, down from October’s 54.8. Markit said there were slower, but still marked gains in output and new orders. Job losses continued but confidence improved further. Looking at some member states, Germany PMI Manufacturing stood high at 57.8. The Netherlands hit 22-month high at 54.4. However, Italy hit 5-monthlow at 51.5. Spain hit 5-month low at 49.8. France hit 6-month low at 49.6. Greece hit 6-month low at 42.3.

Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturing output continued to grow at a decent pace in November… The survey therefore adds to evidence that the region will avoid in the final quarter of the year a similar scale of downturn recorded in the second quarter.

“Encouragingly, a brighter outlook is indicated by the upturn in optimism for the year ahead, suggesting that the upturn should gather strength again in the coming months as lockdown measures ease and spending, especially investment, picks up in response to the recent news on vaccine development.”

Eurozone CPI unchanged at -0.3% yoy, core CPI at 0.2% yoy

Eurozone CPI was unchanged at -0.3% yoy in November, versus expectation of -0.2% yoy. Core CPI was unchanged at 0.2% yoy. Looking at the main components, food, alcohol & tobacco is expected to have the highest annual rate in November (1.9%, compared with 2.0% in October), followed by services (0.6%, compared with 0.4% in October), non-energy industrial goods (-0.3%, compared with -0.1% in October) and energy (-8.4%, compared with -8.2% in October).

UK PMI manufacturing finalized at 55.6, 35-month high

UK PMI Manufacturing was finalized at 55.6 in November, up from October’s 53.7. It’s also a 35-month high, and an expansion reading for six successive months. Markit noted that “Brexit buying” leads to higher purchasing, stocks and exports.

Rob Dobson, Director at IHS Markit: “Growth of the UK manufacturing sector picked up in November, temporarily boosted by ‘Brexit-buying’ among clients and the ongoing boost from economies re-opening following lockdowns earlier in the year…. Whether the upturn of manufacturing production can be sustained into the new year is therefore highly uncertain, especially once the temporary boosts from Brexit purchasing and stockbuilding wane.

“On this front some reassurance is provided by the survey’s gauge of business optimism. Confidence has risen to a level not seen since late-2014, with over three fifths of manufacturers (61%) still expecting to raise output over the coming year. On the other hand, many manufacturers remain very concerned about the outlook and generally reluctant to expand capacity, hence employment fell for the tenth month in a row.”

Swiss GDP grew 7.2% qoq in Q3, still -2% below pre-crisis level

Swiss GDP grew 7.2% qoq in Q3, above expectation of 5.8% qoq. Still, output