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ISM PMI Gives the Bears More Weight

Investors are focusing on US trade relations with China and France, and economic statistics. Published yesterday, the November data on the US ISM Manufacturing PMI were below the market expectations and put serious pressure on the dollar. Instead of growth, the indicator fell from 48.3 to 48.1 points, and for the fourth consecutive month remained in the stagnation zone. Investors are also worried about the negative signals on international trade. Yesterday, US President Donald Trump said that the initial trade agreement with China could be signed after the 2020 US presidential election. The White House administration also announced the possibility of introducing duties in the amount of up to 100% on the import of goods from France with a total amount of USD 2.4 billion. The reason for this was the French digital services tax, which would hurt US technology companies such as Google, Facebook, Apple, and Amazon. Moreover, sales representative Robert Lighthizer confirmed the possibility of an American investigation into taxes on digital services in Austria, Italy, and Turkey. The implementation of these plans may lead to a deterioration of the situation in world trade and additional pressure on the global economy.

Today, prices are correcting down. Quotes are pressured by negative trading signals, according to which the signing of the US-China trade deal can be postponed to 2020, and the United States will impose duties on French exports. In addition, Russian Energy Minister Alexander Novak said that the country has not yet decided on its position on the issue of further reduction in oil production under the OPEC+ agreement. In the evening, investors are waiting for the weekly API report on the US crude oil reserves. The last time they rose by 3.639 million barrels. The continuation of this trend may put pressure on prices.

Eurozone

Investors are focusing on trade relations between the United States and France, which could be another front of the trade war. Yesterday, the US administration announced its intention to introduce increased duties on a wide range of French goods, such as champagne, cheeses, butter, bags, cosmetics, due to the introduction of a digital tax in France affecting large American companies. The total amount of French export taxed may be USD 2.4 billion. French Finance Minister Bruno Le Maire called the increase in fees unacceptable, and the government promised retaliation. The day before, at the hearings in the European Parliament, the new head of the ECB Christine Lagarde spoke. She noted that the regulator will act decisively to restore the financial stability of the Eurozone. Nevertheless, according to Lagarde, the growth of the European economy remains weak, but the level of consumption is high, which allows us “to hope for the best”.

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United Kingdom

Investors are focusing on economic statistics and the upcoming parliamentary elections. The November Construction PMI, published today, although it rose from 44.2 to 45.3 points, remained in the stagnation zone, illustrating the pressure on the sector due to Brexit uncertainty. BRC retail sales in November fell by 4.9% at once. Despite these weak data, the pound is strengthening as investors expect conservatives to win the upcoming parliamentary elections. According to recent polls, the party of Boris Johnson is still seriously ahead of the Labor Party, which gives hope for ratification of the deal with the EU. The British currency is strengthening today against its main competitors – the euro, the yen, and the US dollar.

Japan

In the absence of significant economic releases, the yen is trading under the influence of external factors. The latest aggravation of US-French trade relations and the possibility of transferring the US-China trade deal to next year are forcing investors to buy the yen as a “safe haven”. We also note that sources in the Japanese government announced the preparation of a package of economic incentives worth USD 120 billion to support economic growth. Details of these incentives may appear as early as this week.

Australia

Investors are focused on the RBA decision on the interest rate. The regulator left the interest rate at 0.75%, as expected. The RBA’s head Philip Lowe reiterated that the economy has reached a tipping point and will continue to grow. By 2021, growth could reach 3.0%. At the same time, weak household spending remains the greatest risk. He also noted that due to global and domestic factors, one should expect a long period of low interest rates to achieve full employment and inflation target. The RBA is also ready for further easing of monetary policy, if necessary to maintain sustainable economic growth. The Australian currency today is strengthening against the euro and the US dollar and has an ambiguous dynamics with the pound and the yen.

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