Monday: EU - PMIs for December
- PMIs for Germany and France should show modest expansion
- Contrast between both should remain stark, with FR still below 50 on both measures and Germany around 53 and 55 in manufacturing and services respectively
- ... to finalize the much awaited Single Resolution Mechanism
- Objectives: define the rules to address the failure of a European bank
- Who decides to shut down a bank?
- Who will pay for its bailout?
- Which banks are to be ruled by this new system?
- The proposed draft is full of compromises to accommodate a reluctant Germany
- It is a complex system that would require the participation of numerous EU bodies and deal with a lot of voting before any resolution is carried out
- Not the kind of tools you need when a bank blows up during a week-end, but still better than nothing for future crises
- Members could be influenced by the recent series of positive political and economic news
- US mini-fiscal deal last week lifted some political risks and reduces the probability of another debt-ceiling crisis
- Stronger ISM, good payroll numbers, unemployment rate at 7%, Q3 GDP revised upwards indicate that the US economy could have reached escape velocity
- Many observers think that tapering could be announced now or between the lines for January
- "US Monetary normalization should not cause general asset price deflation as it should come with better growth" - JP Morgan
- Could it be a trigger to stop the market consolidation of the past two weeks? Wait and see. The markets could well remain directionless until year end.
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