- Draghi’s speech today hinted at additional ECB action.
- 3m USD Libor dropped to 0.527% from 0.529%, the first fall since 7/25
- US ISM Mfg improved to 52.7 vs 51.8 exp and 50.8 prev
- Initial Jobless Claims increased to 402k last week vs 390k exp and 393k prev
- France’s Sarkozy Thurs night will outline proposals for treaty changes, Merkel will do the same Fri, and next week we will hear from the new PMs in Italy and Spain. -FT
- SocGen steps up moves to cut dollar funding needs – Société Générale SA is halting its aircraft- and ship-financing activities and also will stop funding leveraged buyouts in the U.S. and Asia – WSJ
- Italian Mfg PMI increased to 44 in Nov vs 42.8 exp and 43.3 prev
- UK Mfg PMI stable at 47.6 in Nov vs 47 exp and 47.4 prev
- Switzerland Mfg PMI declined to 44.8 vs 46.6 exp and 46.9 prev
- Sweden Mfg PMI declined to 47.6 vs 49 exp and 49.8 prev
- Norway Mfg PMI declined to 48.6 vs 50.2 exp and prev
- China Mfg PMI declined to 49 in Nov vs 49.8 exp and 50.4 prev. The HSBC measure declined to 47.7 vs 51 prev.
- South Korea Mfg PMI declined to 47.1 in Nov vs 48 prev
- Australia Mfg PMI increased to 47.8 in Nov vs 47.4 prev
- Brazil is cutting its IOF tax to 0 for foreign investment in stocks
Highlights from Draghi’s speech:
- Dysfunctional government bond markets in several euro area countries hamper the single monetary policy because the way this policy is transmitted to the real economy depends also on the conditions of the bond markets in the various countries. An impaired transmission mechanism for monetary policy has a damaging impact on the availability and price of credit to firms and households.
- I am confident the new surveillance framework will restore confidence over time. I am also quite sure that countries overall are on the right track. But a credible signal is needed to give ultimate assurance over the short term.
- What I believe our economic and monetary union needs is a new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made.
- Other elements might follow, but the sequencing matters. And it is first and foremost important to get a commonly shared fiscal compact right.
Separately, note that the 3m EUR Libor-OIS spread hit a new high today:
And the analog chart of copper vs S&P also doesn’t suggest a bottom until Jan:
Another negative: the Citi US economic surprise index is near multiyear highs. As can be seen in the chart below, historically such occurrences have presaged equity market selloffs. There is also the scary similarity to 1H 2008: