Key highlights for the week will be important US data, global PMI’s for Nov, and US Fed Chairman Powell’s testimony on the CARES Act.
In the short-term, managing the spread of Covid-19 infections continues to impact economic activity. New cases remain extremely high in the UK, Europe, and the US (as well as many other countries). Longer-term, a vaccine now seems likely to be released around the middle of next year and fast-tracking is expected.
The prelim PMI’s from last week reflect the impact of different approaches to managing the spread of infections. There was a sharp contraction in output across the UK and Europe as both regions implemented restrictions. Whereas, the US prelim PMI’s indicated that growth accelerated across manufacturing and services in Nov – there has been no nationally mandated approach to managing the spread of the virus.
The stronger prelim PMI for US manufacturing was expected. Regional surveys had been strong for Nov. This week the ISM PMI’s will provide more detail across services and manufacturing for Nov. US non-farm payrolls and employment for Nov will also provide a vital gauge on the pace of the recovery. There has been some hint of stalled improvement in initial unemployment claims over the last two weeks, so this will be important to watch.
Key data points this week include:
US – Non-farm payrolls for Nov, initial unemployment claims, and the ISM PMI’s across manufacturing and services.
US Fed Chairman Powell will give two days of testimony on the CARES Act to the US Congress.
The final version of the global PMIs will be released this week and will likely reflect the marked contraction across the UK and European economies, the somewhat weaker growth in Japan, and the likely acceleration of growth in the US.
In Australia, the RBA will meet on rates on Tue 1 Dec. As of 30 Nov, there was a 43% expectation of no change to rates (source: https://www2.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker). Aus Q3 GDP will also be released this week.
Data on US Fed purchases of Treasury securities and MBS are incomplete as of the time of posting. The new schedule will be released late on 30 Nov. Last week, purchases of US Treasuries totaled approx. $4bn. Purchases of MBS were elevated, and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases of MBS were approx. $20bn.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $527bn in ST Bills, Notes, TIPS, and Bonds this week, raising approx. $140bn in new money. The bulk of the settlements will take place on Mon 30 Nov.
This week, approx. $27bn in Bills will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
