MNI US Open: A Bad Week For Turkey

FRANCE DATA: Strong PMI data driven by services

Positive print for the French PMIs with services at 58.2 (55.5 exp, 56.6 prev), manufacturing at 54.6 (53.1 exp, 53.6 prev) and composite at 56.3 (53.9 exp, 54.7 prev). Strong output for services and employment in general and further cost pressures. Only a small market reaction as we expected to an upside print. Highlights from the Markit press release:

• "The fastest increase in services activity for almost four years"
• "In order to meet existing and expected demands on their businesses, private sector employment across France continued to increase in November. In line with the trend seen in recent months, jobs growth remained well above its historical average and was primarily led by service providers."
• "Elsewhere, steep rates of both output price and input cost inflation were once again recorded in November. Price pressures were particularly acute at manufacturers"
• "Selling charges were increased at the strongest rate since May 2011 during November as both manufacturers and service providers marked up their prices to stronger extents to protect their profit margins."

GERMAN DATA: Weaker details underpin strong PMI prints

Above-consensus prints for the German PMIs too, with services at 57.6 (56.9 exp, 57.8 prev), manufacturing at 53.4 (51.5 exp, 52.4 prev) and composite at 52.8 (51.0 exp, 52.0 prev). However, other than employment, the details were much more subdued in terms of output and new orders but price pressures continued. Highlights from the press release:

• "Data pointed to unprecedented inflationary pressures, with firms linking the latest rises with ongoing supply issues and shortages."
• "The latest uplift in new work was the slowest for nine months as gains to demand were hindered by supply bottlenecks, input shortages and an associated decline in demand from the automotive sector"
• "November's flash data pointed to a stalling of new business at German service providers"
• "The rate of expansion in manufacturing new orders remained among the weakest since the recovery began in 2020, despite quickening since October to a solid rate"
• "The rate of [price] increase hit a survey record for the second month running as firms sought to maintain margins by passing greater costs through to clients where possible."
• "German companies continued to take on additional staff in November, extending the current sequence of higher employment which began in January. According to anecdotal evidence, firms were taking on staff to alleviate capacity pressures and in preparation for a strong rebound in the coming months."

EUROZONE DATA: PMI details mixed  (1/2)

Higher than expected Eurozone PMI print, too, but again the details mixed with employment higher than expected, price pressures elevated but output expectations at their weakest since January.

• Note that data were collected 10-19 November (and responses are normally front-loaded). So these output expectations were before the worst of the lockdown news and before the Austrian lockdown was announced.
• However, this is still enough for EURUSD to be on the front foot today with the Euribor strip and Bunds under pressure.
• From the press release:
• Employment: "Although the rate of job creation rose to the second-highest in over 21 years as firms sought to meet rising demand, optimism about the outlook sank to a ten-month low on renewed COVID-19 worries and lingering supply constraints."

EUROZONE DATA: PMI details mixed (2/2)

• Output:
• • Services saw "the strongest growth of activity for three months. Growth also picked up in manufacturing, though remained the second-weakest seen over the past 17 months"
  • "The rest of the region as a whole meanwhile enjoyed faster growth of both manufacturing and services than seen in France and Germany."
  • "Future output expectations deteriorated to the lowest since January. Ongoing concerns over supply chain issues were exacerbated by growing worries about the impact of further COVID-19 waves, which darkened the outlook for services in particular."
• Prices:
  • "Shortages were meanwhile once again seen as a principal driver of higher prices for many goods and services, alongside higher shipping costs, rising energy prices and increases in staff costs. November consequently saw a survey record increase in firms' input costs for a second successive month."
  • "Selling price inflation likewise accelerated in both manufacturing and services to the fastest in almost two decades of comparable survey history as firms sought to pass higher costs on to customers, most notably in Germany."

UK DATA: Strong PMI details as output and consumer demand remain solid

PMI data a little better than expected for services and composite and almost a point better than expected for manufacturing. Looking through the report there are strong details in here with output and consumer demand looking good.

• Market reaction rather subdued given only a small upward surprise to the data.
• Highlights from the press release:
• Input prices at highest pace of increase since January 1998 "driven by higher wages and a spike in prices paid for fuel, energy and raw materials"
• "Exceptionally strong cost pressures meant that prices charged by manufacturers increased at the steepest rate since the index began 20 years ago. However, service providers indicated a slight slowdown in output charge inflation to its lowest for three months, with some citing greater resistance to higher selling prices among clients."
• "Customer demand continued to rise sharply in November, despite the pass through of higher costs to clients, with the overall rate of new order growth accelerating to a five-month high."
• "Service providers reported a faster recovery in new work than goods producers. Subdued momentum in the manufacturing sector again reflected constraints on growth due to the global supply chain crisis. "
• "Strong customer demand and increased backlogs of work contributed to another marked rise in private sector employment during November. Staffing numbers have now picked up in each of the past nine months, although the latest increase was the slowest since April. Survey respondents widely noted that recruitment difficulties and unexpected staff departures for higher wages or lifestyle changes had constrained employment growth."

FIXED INCOME: PMIs the driver this morning with big moves in Bunds

There have been some big moves in Bunds this morning following the stronger-than-expected German, French and Eurozone PMI prints. However, we would caution that some of the moves look a little excessive - there are clear inflationary pressures, but the underlying details outside of prices and employment look rather weak. The UK PMI in contrast saw less of a headline surprise but was more positive in the underlying details.

• The bear steepening of the Bund curve has seen 2s5s steepen 2.4bp and 2s10s steepen 3.4bp on the day. The gilt curve has seen more of a parallel 1.6bp shift with yieldds higher while the UST curve has steepened most in the 2s7s area (1.5bp steeper on the day).
• TY1 futures are down -0-3+ today at 129-28+ with 10y UST yields up 0.8bp at 1.633% and 2y yields down -0.6bp at 0.627%.
• Bund futures are down -0.63 today at 171.14 with 10y Bund yields up 4.3bp at -0.260% and Schatz yields up 0.3bp at -0.834%.
• Gilt futures are down -0.17 today at 126.12 with 10y yields up 1.5bp at 0.947% and 2y yields up 1.4bp at 0.535%.

FOREX: EUR Off the Mat as PMIs Improve

• The single currency is among the session's best performers so far Tuesday, with the EUR improving on the back of a set of better-than-expected PMI numbers across the continent. Prelim data showed growth was higher than expected across both manufacturing and services sector in France and Germany.
• This puts EUR/USD back above 1.1250 ahead of the NY crossover and thereby off the new YTD lows printed in early Asia-Pac hours at 1.1226. There's little evidence of a sustained bounce at present levels, with markets needing to top 1.1307 before indicating any further recovery.
• Elsewhere, markets are more mixed, with CAD, NZD and NOK among the session's worst performers as commodity markets trade more subdued. WTI and Brent crude futures are off over 1.5% on the day, possibly in anticipation of a coordinated release of oil reserves from some of the world's largest consumers at some point today.
• US prelim PMI takes focus going forward, with both the manufacturing and services sector seen improving from the October read. Both sectors are seen growing at a decent clip, with the data seen holding just below 60.0. The speaker slate picks up, with BoE's Bailey, Cunliffe and Haskel all due as well as BoC's Beaudry and ECB's de Guindos.
• Lastly, President Biden speaks directly on the US economy and inflation at 1400ET / 1900GMT.

EQUITIES: Tech Leads Overnight Weakness

• Asian stocks closed mixed (Japan is closed for holidays), with China's SHANGHAI closed up 7.009 pts or +0.2% at 3589.089 and the HANG SENG ended 299.76 pts lower or -1.2% at 24651.58.
• European equities are sharply lower, with the German Dax down 169.32 pts or -1.05% at 15936.54, FTSE 100 down 28.22 pts or -0.39% at 7229.53, CAC 40 down 62.32 pts or -0.88% at 7049.04 and Euro Stoxx 50 down 42.84 pts or -0.99% at 4291.75.
• U.S. futures are a little weaker overnight, with the Dow Jones mini down 3 pts or -0.01% at 35568, S&P 500 mini down 3.5 pts or -0.07% at 4676.25, NASDAQ mini down 46.25 pts or -0.28% at 16336.

COMMODITIES: Gas Jumps, Oil Drops, Precious Metals Weaken

• WTI Crude down $1.12 or -1.46% at $75.67
• Natural Gas up $0.21 or +4.32% at $4.984
• Gold spot down $6.81 or -0.38% at $1797.43
• Copper up $2.75 or +0.63% at $442.3
• Silver down $0.25 or -1.02% at $23.9146
• Platinum down $6.42 or -0.63% at $1007.11