MNI US Open: Curbed Enthusiasm For E.C.B. Easing

EXECUTIVE SUMMARY:

• E.C.B.'S SCHNABEL WARNS AGAINST HOPES FOR BLOCKBUSTER STIMULUS
• EUROZONE SEES WEAK PMIS, DEFLATION IN NOVEMBER
• BOE TENREYRO: NEGATIVE RATES EFFECTIVE ECON BOOST
• O.E.C.D. SEES GLOBAL ECONOMY TURNING THE CORNER ON CORONAVIRUS CRISIS

Fig.1: Taming Expectations For ECB Stimulus Package In December

BBG, MNI

NEWS:

ECB (BBG): The European Central Bank should focus on keeping financial conditions at current levels through the crisis rather than announcing a blockbuster stimulus package that beats market expectations, according to Executive Board member Isabel Schnabel. Just over a week before the ECB Governing Council's policy decision, Schnabel confirmed that more support is likely because the pandemic will be more protracted than expected. "This has to be reflected in our policy decisions," she said in an interview on Monday. But she also noted that borrowing costs have dropped to record lows because of monetary and fiscal aid, and what is most important is sustaining that state of affairs until the crisis is past."It is appropriate to focus on preserving these conditions rather than easing much further," she said. "If it's necessary to do something that doesn't meet market expectations, we have to do that nevertheless."

EUROZONE DATA: The headline EZ HICP remained in negative territory and registered at Oct's level of 0.3% in Nov, coming in slightly weaker than markets expected. Core inflation remained at 0.2% in Nov which is in line with marketforecasts.* Food prices decelerated to 1.9% in Nov following Oct's uptick to 2.0%. Service inflation picked up to 0.6%, while non-energy industrial goods prices declined by 0.3% Energy prices showed the largest annual decrease, plunging by 8.4%. Among the member states for which data is available, Greece (-2.0%) and Estonia (-1.3%) recorded the largest declines, while Slovakia (1.5%) and the Netherlands (0.7%) posted the highest rates.

BOE: Evidence shows "negative rates have been very effective in boosting the economy," Bank of England Monetary Policy Committee Silvana Tenreyro said Monday, reaffirming her sympathy for sub-zero rates. According to Tenreyro, NIRP should work through both the wealth and FX channels and research has downplayed their impact on banks' profitability. On prices, she said there are no signs of pressure from domestically generated inflation, at least in the near-term, with the low interest rate environment set to persist and the likelihood of subdued wage inflation.

ITALY PMI DATA (IHS MARKIT): The seasonally adjusted IHS Markit Italy ManufacturingPurchasing Managers' Index (PMI) registered 51.5 in November and signalled a fifth successive monthlyimprovement in the health of the Italian manufacturing sector. Falling from 53.8 in October, however, the headline PMI signalled a slower rate of improvement.

SPAIN PMI DATA (IHS MARKIT): Manufacturing PMI fell from October's 52.5 to record 49.8 in November. Slipping below the 50.0 no-change mark, the index marked the first deterioration in operating conditions for three months. A drop in new orders was the primary reason behind November's fall in the PMI.

CHINA (MNI EXCLUSIVE): The world's biggest trade deal will help China's foreign trade grow by double-digits in the next five to 10 years and allow the country to rival Japan at the top of Asian supply chains by 2040, Wei Jianguo, former vice minister of commerce, told MNI. For full interview contact sales@marketnews.com

GLOBAL ECONOMY (RTRS): The outlook for the global economy is improving despite a second wave of coronavirus outbreaks in many countries as vaccines emerge and a Chinese-led recovery takes hold, the OECD said on Tuesday.The global economy will grow 4.2% next year and ease to 3.7% in 2022, after shrinking 4.2% this year, the Organisation for Economic Cooperation and Development said in its latest Economic Outlook.After a second wave of infections hit Europe and the United States, the Paris-based policy forum trimmed its forecasts from September, when it expected a global contraction of 4.5% before a 5% recovery in 2021. It did not have a 2022 forecast at the time.

OPEC: The OPEC+ meeting due to take place today to reach a decision on the prolonging of oil production cuts or a ramp up in Q121 has been postponed until Thursday 3 Dec to allow ministers more time to reach a consensus.

COVID/EUROPE (BBG): Pfizer Inc. and partner BioNTech SEsought regulatory clearance for their Covid-19 vaccine in Europe, putting the shot on track for a potential approval there before the end of the year. The formal application submitted on Monday caps a rolling review process that started on Oct. 6 and allowed Europe's drugs regulator to examine data on the vaccine as it emerged.

RBA: The Reserve Bank of Australia said Tuesday it remains prepared to expand its quantitative easing program based on the outlook for jobs and inflation although it left policy settings unchanged, citing the recovery underway. In its statement, the central bank said it is keeping the size of its bond purchase program "under review, particularly in light of the evolving outlook for jobs and inflation." "The Board is prepared to do more if necessary," the statement said.

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