An important Eurozone baseline read.

Germany is the strongest member state of the EU, so its PMI is a key indicator of health in the Eurozone.

November’s print was the lowest in 4 years. New emissions testing for cars, or a trailing of overall demand as the trade war tariffs bite hard with global ripple effects?

Draghi on QT in December.

Next month, European Central Bank (ECB) President Mario Draghi will tell the world whether the Eurozone quantitative easing will come to an end.

That relates to ECB bond buying, however the other question is what will happen with interest rates.

In light of the German PMI print and the trade war in general, it’s all pointing to lower for rates longer.

That said, a lot is riding on US/China discussions (if they occur) at the G20 catch up next week.

December will be a big moment for Jerome Powell and the Federal Reserve’s (Fed) independence.

December is shaping up as a key month in the US as well.

The Fed’s open market committee, or FOMC, will provide guidance on whether it will buckle under the equities market (and halt interest rate hikes), or continue with its normalisation program with another interest rate hike and no changes to its quantitative tightening (QT) program (i.e., the balance sheet run-off).

QT + the expected December interest rate hike would create more heartache for equities.

On the other hand, an interest rate hike pause now might be considered irresponsible of a Fed that is seeking to (a) respond to 2.5% inflation data; (b) normalise the quantum and cost of money in the system; and (c) build up sufficient dry powder to respond to a future crisis, in the event there is one.

We will find out over the next few weeks.

Mike.

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