Tuesday: 5 Things Markets Are Talking About

There’s more bad news for Chinese manufacturing, the euro area recovery continues and Puerto Rico faces a deadline. Here are some of the things that people in markets are talking about today.

1. Chinese manufacturing still weak

Chinese authorities did not get much time to celebrate the yuan’s inclusion in the IMF’s SDR currency basket as new data overnight showed manufacturing continued to contract in the world’s second-largest economy. The official purchasing managers index fell to 49.6 in November, the lowest level since 2012 and below expectations for a drop to 49.8. On the flipside, the services index rose to 53.6. Stocks in China gained, lead by developers expecting further stimulus from the Chinese government to fight the ongoing slowdown.

2. Euro area recovery continues

Markit Economics said that its Purchasing Managers Index for the euro area rose to 52.8 in November from 52.3 the previous month. All euro area countries, with the exception of Greece, are seeing expansion in their manufacturing sectors. There was also good news on the employment front with Germany’s unemployment rate falling to a record low of 6.3 percent while in Italy unemployment dropped more than expected to reach 11.5 percent. However, it is unlikely that this improving data will do anything to hold back the European Central Bank’s easing plans on Thursday.

3. U.K. banks rally

Royal Bank of Scotland Group Plc and Standard Chartered Plc rose in London trading after passing the latest round of stress tests from the Bank of England. Investors had been concerned that the banks would be forced to raise more capital by the BoE. This isn’t the end for stress-tests though, as BOE Governor Mark Carney backed plans to widen the financial stability net to include investment funds in the U.K.

4. Puerto Rico deadline

The long-running Puerto Rican debt saga may reach a turning point today as the commonwealth must choose between paying investors $354 million in principal and interest or keeping the cash for government services. Governor Alejandro Garcia Padilla will appear before a hearing of the Senate Judiciary Committee today amid a continued lack of any consensus on how to help his administration.

5. Coming up…

We warned yesterday that there are a lot of important economic events toward the back-end of this week, but that does not mean data will be light ahead of Thursday and Friday. Today in the U.S., Markit Manufacturing PMI is due at 9:45 a.m. ET and ISM manufacturing at 10:00 a.m. Total vehicle sales for November are also scheduled to be published later today, with expectations for 18.1 million units last month, a slight drop on October’s 18.12 million.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments.
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.
Dean Popplewell