December has started on a positive note economically, as many governments report their purchasing manager’s data which reflects the state of manufacturing in their countries. Solid increases in Europe paint a better picture than expected ahead of the ECB meeting which could generate fireworks. Chinese data was mixed, as GDP could edge lower, while the PMI data was robust.
China reported that its official purchasing manager’s index was unchanged at 51.4 in November over the weekend. Many analysts had expected the released to show a small decline given the HSBC preliminary measure slipped to 50.4 from 50.9. The sub-indexes saw some improvement. Export rose to 50.6 from 50.4, but new orders slipped to 52.3 from 52.5.
In Europe, governments reported their purchasing managers survey’s that reflect the state of manufacturing in the region. Nearly all the purchasing managers’ indices in Europe were stronger than expected. UK, German, Swiss, Italian, and French surprised on the upside. The headline EU PMI came in at 51.6 compared with 51.5 expected.
Although the credit news in the core of Europe was unfortunately, news in the periphery was uplifting. S&P cut its Dutch ratings to AA+ from AAA. Over the weekend, Moody’s upgraded its rating for Greece by two notches to Caa3, citing the optimism regarding it achieving a primary budget balance. This comes on the heels of L S&P upgraded its outlook for Spain to stable from negative last week. Bond in the periphery has reflected this outlook with spreads continuing to tighten.
The US employment report will be released this Friday and will anchor a week chocked full of data. Prior to this release invests will absorb employment data from Monday’s employment sub-index ISM manufacturing report. On Wednesday ADP will release private employment data which will likely be the driving force behind the government’s report. The trend in private sector payrolls has improved recently. The three-month average through October stood at 190k, which was above the six-month average.
The EUR/USD turned lower on Monday after testing resistance near 1.3620. Support is seen near the 10-day moving average at 1.3540, and then an upward sloping trend line that connects the lows in July to the low in November that comes in near 1.3400.
Momentum is positive but the trajectory of the MACD (moving average convergence divergence) index has flattened. The RSI (relative strength index) has turned lower with price action printing near 50 which is in the middle of the neutral range and reflects consolidation.