Recoveries And Trust Issues

Recoveries And Trust Issues

Global equities were buoyant to start the final month of 2020, rebounding from an uninspired final session to an otherwise blockbuster November.

Sentiment was bolstered Tuesday in part by PMI data out of Asia that suggested the region’s key economies continue to recover from the pandemic downturn (figure below). “Strong manufacturing PMIs for Korea and Taiwan add to the happy picture for those economies and for Asia as a whole,” Bloomberg’s Kyoungwha Kim remarked.

China’s Caixin manufacturing gauge surged to the highest in a decade, printing 54.9 for November, and adding to the upbeat vibes from the official PMI out Monday.

“Manufacturing companies in China recorded a sharp and accelerated rise in production during November, with the rate of expansion the quickest for 10 years,” the color that accompanied the ebullient Caixin release read.

“Employment recovered markedly and overseas demand kept expanding. Manufacturing enterprises added to their inventories to meet demand and were quite confident about the economic outlook for the next 12 months,” Wang Zhe, Senior Economist at Caixin Insight Group beamed, adding that “we expect the economic recovery in the post-epidemic era to continue for several months.” Tuesday’s print for November marked the seventh consecutive month of expansion for the gauge.

Meanwhile, South Korea’s export machine held up reasonably well despite surging COVID caseloads around the world. Shipments rose 4% YoY last month, less than the 7.5% the market wanted, but it’ll work.

Notably, semi exports jumped 16%. Revisions to the first vintage of Q3 GDP were positive as well. Bloomberg helpfully notes that “purchases by Huawei ahead of US sanctions helped lift Korean exports in the third quarter, but excess inventory among other buyers remains a concern for chip manufacturers.” So, that gives you some context.

The OPEC+ drama is ongoing, although I personally tend to look through the theatrics. As most readers are surely aware, this week’s meeting was delayed due to a lack of consensus, and the market really does need support at a time when the demand outlook is the furthest thing from clear.

“It’s been a far more disjointed OPEC meeting week than your usual muddled affair,” AxiCorp’s Stephen Innes said. And that’s really saying something, because, again, these tend to be “muddled affairs” almost by definition.

“While an extension of the current quotas would be the key to bridge the likely COVID-19-linked demand softness in the northern hemisphere winter, the progress being made on vaccines provides 2021 price discovery,” Innes added.

RBC offered some amusing color on the proceedings. “Once again the OPEC ministerial meeting generated nearly as much drama as an episode of Gossip Girl, as the producers failed to reach a consensus on extending the 7.7 mb/d production cut and postponed the all-important OPEC+ meeting by several days,” Helima Croft remarked.

RBC

“We still believe that the group will probably find some face-saving compromise, with a short extension being the most likely outcome followed by a phased production return,” Croft went on to say. “Nonetheless this latest fracas does not bode well for collective cohesion in 2021 as vaccine optimism abounds and producers anticipate a strong recovery.”

And look, folks, if you can’t trust a cartel meeting, what can you trust?


 

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