Week ahead: UK and global PMIs, Eurozone inflation, US employment data

Financial markets are bracing themselves for a busy end to a chaotic year, as we enter the last month of 2020.

As for the coronavirus, on 2 December, the four-week lockdown will end and England will return to its tiered system to monitor the virus.

European countries are still fighting the second wave, but lockdowns and restrictions are helping slow the spread in many nations. In the US, the numbers continue to climb to record highs.

Things look hopeful with three vaccine trial results showing more than 90% effectiveness, it is possible that we could start to see a global synchronised growth rebound in the second half of 2021.

Markets could also be in for little turbulence as US president Donald Trump is going to allow for a less bumpy than expected — but not smooth as he refuses to concede — transition to a Joe Biden presidency.

The Organization of the Petroleum Exporting Countries and its allies (OPEC) is set to meet on 30 November to decide what to do with oil output for the next three to six months.

While OPEC is expected to extend current output cuts into next year, some members of the group are facing major obstacles. For instance, Iraq is seeking upfront payments of about $2bn (£1.9bn) for a long-term crude-supply contract, as the country continues to suffer an economic crisis due to low oil prices and wider OPEC cuts.

Elsewhere: In China, manufacturing and services PMIs are the headline the data releases next week as the country continues to perform solidly, despite global nations struggling to cope with a second wave of the coronavirus.

Developments over the weekend that will interest investors:

• Brexit: UK and EU restart face-to-face negotiations in London

• UK could become first Western country to approve a COVID-19 vaccine

UK: Lending figures, mortgage applications, manufacturing and services PMIs, Brexit and COVID-19

It is a very busy week for Britain, as we enter the final month of the year. With that, we near the looming 31 December Brexit deal deadline.

The closer we get to the end of the Brexit transition period the more fretful the pound may get. It is yet to be seen whether the FTSE (^FTSE) will share sterling’s concerns, or if it will continue to rise whenever the currency is under pressure.

Face-to-face talks resumed on Saturday as EU’s top negotiator Michel Barnier returned to London after undergoing self-isolation. The two sides are still thrashing out differences including fishing rights in UK waters, governance of the agreement, and unfair competition rules.

More importantly, the second national lockdown in England is due to come to an end on 2 December, with regions and cities across the country moving back into different tiers, in accordance with infection rates.

So far, it seems that that the lockdown restrictions may be working to slow the spread of the coronavirus. The R rate in the UK fell to between 0.9 and 1 from between 1 and 1.1 previously. This means that for every person who gets the virus, they are now spreading it to less than 1 person at a time.

But as England comes out of lockdown and moves straight into different tiers, the Christmas period could prove problematic as prime minister Boris Johnson revealed relaxation of measures for a few days.

Industry-wise, manufacturing and services PMIs are out for November. Last week’s flash PMIs were slightly better than expected, in spite of England’s national lockdown coming to an end on 2 December.

Manufacturing particularly surprised strongly to the upside, with a rebound to 55.2, while the UK’s biggest sector, services slipped back to 45.8, still beating expectations.

Meanwhile, construction is also set to remain resilient given that sector remained open in November.

The latest consumer credit and mortgage approvals numbers for October are also released this week.

UK mortgage approvals figures have been strong in recent months as homeowners strive to take advantage of the stamp duty changes which are due to expire at the end of March 2021. This has prompted a surge in buying and selling interest, with approvals running at their best levels since October 2007, following a record low in April.

Watch: What does a Joe Biden presidency in the US mean for the global economy?

US: Unemployment rate, non-farm payroll, Biden administration forming

Trump is continuing to fight the election result and is going out swinging, but his administration has given the green light for a formal transition to get underway. On Saturday, Pennsylvania’s highest court dismissed the Republican’s bid to throw out 2.5 million mail-in-votes.

Investors will watch for any signs of movement on the fiscal side to provide support to an economy that is going to be experiencing more pain in the weeks ahead.

Market sentiment will be likely influenced by news on the timing of a vaccine and worries about an intensification of COVID-19 containment restrictions in the wake of Thanksgiving gatherings. Cases in the US were already soaring, but holiday travel and socialising could see an acceleration that necessitates aggressive action to prevent healthcare systems buckling under the pressure.

How will the last non-farm jobs report of the year shake America? Friday’s report will show whether it will be cheery or solemn news.

The headline number has been falling month-on-month from the 4.8 million peak posted in June. The drop-off slowed between September and October, slipping from 661,000 to 638,000.

This week’s non-farm payrolls report is expected to add another 500,000 jobs to the 638,000 added in October, however the gains of the past six months still remain short of recouping the 21.5 million jobs lost in March and April at the height of the pandemic.

One of the positive things about the US economy’s rebound in recent months has been the slide in the unemployment rate, from its peak in April of 14.7%, to 6.9% in October. Experts predict that trend is to continue in November with a further decline to 6.7%.

Weekly jobless claims had until two weeks ago continued to fall, but they have started to edge up again from a low of 711,000 to 778,000 last week, amid concerns that the lack of fiscal stimulus is now starting to slowdown the US economy.

Federal Reserve chair Jerome Powell and US Treasury secretary Steven Mnuchin are due to testify on used COVID-19 relief funds before the Senate Banking Committee on Thursday.

Eurozone: Inflation and other host of data

It’s a packed week data-wise for the Eurozone, with German and Spanish inflation out on Monday.

Investors will be keen to watch the inflation rate for November as it will be the last important data to come out ahead of the European Central Bank's (ECB) 10 December meeting.

German retail sales and the final manufacturing PMIs on Tuesday, Spanish unemployment on Wednesday.

And rounding up the week, the final services region-wide PMIs on Thursday and Italian retail sales and German factory orders on Friday.

For EU it will be important to see whether retail sales have held up in October ahead of the November closures in some countries.

The most recent flash PMI numbers from EU’s biggest economies Germany and France showed a big divergence, with France manufacturing weakening slightly to 49.1, while German manufacturing remained strong at 57.9, despite rising coronavirus infection rates.

Outside of the data, the battle continues between Hungary and Poland and the other 25 member states of the EU over the "rule of law" clause tied to the 2021-2027 budget, with the two nations vowing to stand side by side in their fight against Brussels.

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