Not me

The Eurozone did itself no political favours at the weekend after Brussels escalated its skirmish with pharmaceutical manufacturer Astrazeneca. Having briefly threatened to create a hard internal Irish border, in order to prevent medication going to England, the EU turned down the temperature from boil to simmer. The argument centres on the slow pace of Covid vaccination in Europe.

EU member nations are aggrieved that their central procurement process has made less progress than Britain and the United States in obtaining and administering Covid vaccines. The European Commission are placing the blame with Actrazeneca, accusing it of diverting product from Belgium and the Netherlands to the UK. Astrazeneca’s plea of not guilty sounds plausible to investors, and it will supply an extra nine million doses to the EU by the end of March.

The episode has no direct impact on the value of the euro or, indeed, the pound. The two are unchanged from one another since Friday morning, however it is another bump in the road for the euro.

Stimulus hesitancy

On two sides of the Pacific there are indications that the stimulus gravy train is running out of steam. In America, Joe Biden’s $1.9 trillion package is shrinking by the day. In Australia, Prime Minister Scott Morrison and Treasurer Josh Frydenberg have both indicated that “blank cheque” support must come to an end.

In Washington, a group of Republican Senators proposed a $600 billion counter to the President’s manifesto pledge. The Democrats could still go it alone in pursuit of the full $1.9 trillion but with a majority of just one in the Senate – the VP’s casting vote – and some flaky support in their own party, dilution of the package looks feasible.

In Australia, Treasurer Josh Frydenberg continues to insist that the JobKeeper (furlough) scheme will not continue beyond the end of March. In the draft of a speech he will deliver today, Prime Minister Scott Morrison says “You can’t run the Australian economy on taxpayers’ money forever”, and “we are not running a blank cheque budget”. The USD and AUD are just about unchanged against each other, the Aussie fractionally ahead.

Mostly manufacturing PMIs

Among the relative deluge of data on Friday there was nothing to inspire either admiration or dread among investors. German gross domestic product shrank by 3.9% in 2020, a tiny bit less than forecast, and US consumer confidence was very slightly lower than expected.

The three Chinese purchasing managers’ indices released this morning all came in lower on the month and below forecast. Readings from NBS for manufacturing and services were 51.3 and 52.4 while the Caixin (Markit) manufacturing figure was 51.5. The two Australian measures at 55.3 and 57.2 are not directly comparable to one another but were still usefully positive.

Britain’s manufacturing PMI is pencilled in at 52.9, which would represent no change on the month. At the same time the Bank of England will report on consumer credit and mortgage approvals. Tonight the Reserve Bank of Australia is unlikely to make any change to monetary policy.