Daily Market Report - 02/12/2015

Yesterday's pmi figure showed Growth in Britain’s manufacturing sector has weakened and costs are falling sharply, suggesting Bank of England policymakers are unlikely to be in a rush to raise interest rates.The purchasing managers’ index (PMI)  declined to 52.7 in November, from a revised 55.2 in October. That remained above the 50-level that signals expansion; but suggested momentum in the sector is weakening.

Bank of England governor Mark Carney has suggested that the decision about rate rises is likely to “come into sharper relief around the turn of this year;” but continued deflation across industry is likely to undermine the arguments for an increase in borrowing costs at next week’s monetary policy committee meeting, the last of 2015.

Mark Carney also made another interesting comment yesterday "By using macroprudential tools of a variety of sorts, including the counter-cyclical buffer, we do increase resilience in the system  and we make it less likely we make the system more resilient to the manifestation of any of those risks, whether they come in the medium-term or beyond, and that allows monetary policy to do its job, which is to achieve the inflation target."

Manufacturing in the U.S. unexpectedly contracted in November at the fastest pace since the last recession as elevated inventories led to cutbacks in orders and production. The Institute for Supply Management’s index dropped to 48.6, the lowest level since June 2009, from 50.1 in October. The November figure was weaker than the most pessimistic forecast in a Bloomberg survey. Readings less than 50 indicate contraction. Ten of the 18 industries surveyed by the purchasing managers’ group shrank, including apparel, plastics and machinery. Five industries posted growth.

The U.S. ISM group’s production measure dropped to 49.2 from 52.9 in October. New orders fell to 48.9 in November from 52.9. Both gauges were the weakest since August 2012. The index of export orders held at 47.5 in November, the sixth month of contraction.

Federal Reserve policy makers will take the manufacturing data into consideration as they debate whether the economy is strong enough to withstand higher tighter monetary policy this month. The Federal Open Market Committee meets Dec. 15-16 and is expected to raise their benchmark interest rate by 0.25 percentage point.
Germany’s unemployment rate unexpectedly dropped to a record low in a sign that robust domestic demand is bolstering confidence in the growth prospects for Europe’s largest economy.The jobless rate fell to 6.3 percent in November, the lowest level since German reunification, from 6.4 percent the previous month. The number of people out of work declined a seasonally adjusted 13,000 to 2.77 million. Economists in a Bloomberg survey predicted the rate would remain unchanged and the number of jobless would decline by 5,000.

Germany’s Bundesbank has described the nation’s economic momentum as still "quite strong" with a solid labor market supporting domestic demand even as exports falter amid slower global growth. The European Central Bank is widely expected to expand stimulus for the euro area on Thursday, further fueling the recovery in the region. The number of people without work fell by about 6,000 in western Germany and about 8,000 in the eastern part of the country, the report showed.

Key Announcements
0930 - GBP : Construction PMI  expected to fall to  58.4  from 58.8 last month
15:15 - USD: ADP Non-Farm Employment Change expected to improve to 191k from 182k 
17:25 - USD: Janet Yellen Speaks