Europe Mildly Lower Services PMI In Focus

EU bourses are heading for a slightly softer start awaiting fresh catalysts, after a choppy session on Wall Street where investor digested a weak jobs report and awaited further news on stimulus talk and vaccine approvals.

On Wednesday UK became the first country to approve the Pfizer and BioNtech vaccine, the FTSE shot higher. The rollout is set to begin next week. However the logistical challenges will be huge as the vaccine must be kept in long term storage at -70C and the rollout is set to take many months.

Before the vaccine becomes widely available there is a challenging few months to traverse across and investors received a stark reminder of this reality from poor US ADP private payroll data, record high US covid hospitalisations and following an extension to the national lockdown in Germany until early January.

China’s recovery continues
Meanwhile the recovery in China continues on the right track. Overnight Chinese sector PMI data revealed that growth in the service sector soared in November as new business rose at the fastest pace in over 10 years. The Caixin/Markit PMI index rose to 57.8 as consumer demand continues to recover following covid restrictions earlier in the year.

Services PMIs
In Europe service sector PMI data will also be in focus. In the UK, November’s flash estimate of 45.8 is expected to be confirmed, down from 51.6 in October as lockdown restrictions were imposed. This would be fifth straight month that activity in the sector has fallen, putting the economy on track for a double dip recession in the final quarter.
Service PMI readings from Spain and Italy will also be closely watched as these are initial readings.
In the US jobs remain in focus with jobless claims data potentially confirming a stalling in the labour market recovery.

Oil slips OPEC in focus
Oil prices are declining ahead of OPEC returning to discussions on output strategy for 2021. Earlier in the week no agreement was reached over how to tackle declining demand. With recent vaccine developments some producers are questioning the need to tighten supply.

FTSE Chart
The FTSE is hovering around the flat line at 6465, towards the upper end of the horizontal channel that it has remained since early November. A break above 6500, the top band could open the door to 6520 June high, prior to 6670 high 6th March. On the flip, failure to break through 6500 could see the FTSE head back towards 6250 the lower band on the channel.

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