PMI reports are the keyword in the market newsfeed today. The services PMI in Spain for November, while clearly showing a decline for the period when the country was wrestling with another major Covid-19 outbreak and a national lockdown, was ultimately not as bad as expected. Italy and Germany, on the other hand, both failed to meet the forecast for their respective services sectors.
The eurozone’s composite PMI amounted to 45.3, slightly better than anticipated (in large part because manufacturing has remained steady throughout the lockdown period), even though any number under 50 still indicates a contraction in the economy.
The same can be said of the United Kingdom - better reports than the forecasts, but all under 50, which is hardly surprising, considering the pandemic and the lockdowns.
Later in the day we expect a flood of ISM reports from the United States, as well as the latest developments in the labor market, in the form of initial and continuing jobless claims.
For today, at least, it seems that the disappointing economic reports from Europe and possibly North America will depress the stock markets. All major US indices are down today.
In the United States, Democrats are trying to take matters in their own hands by formally supporting a compromise stimulus bill of $908 billion. They previously called for a much more generous package to address a broader scope of coronavirus-related concerns.
However, Senate Republicans made it clear that they would not agree to such a bill. The current one, which is backed by House Speaker Nancy Pelosi, Senate minority leader Chuck Schumer, and President-elect Joe Biden. The latter stated that while the bill is insufficient in answering all of the economy’s needs, something needs to be done immediately to alleviate the situation.
US fundamentals have been turning increasingly disappointing as the coronavirus pandemic worsens. The House and the Senate have been arguing over stimulus since August and the lack of a compromise has contributed to the worsening of the state of the US economy.
The American dollar is also continuing its descent, dropping to its lowest level in 31 months. Some of the currencies that have performed best against it include the euro, the Australian dollar, the Korean won, and the Chinese yuan. Other safe havens are also under pressure still.
