Central bank interest rate announcements from Australia, Canada, the UK and Europe

This week sees central bank interest rate announcements from Australia, Canada, the UK and Europe along with the Chancellor’s Autumn Statement in the UK on Wednesday and key unemployment data out of the US on Friday.

Yesterday was dominated by the ongoing saga’s around Greece and the so called ‘fiscal cliff’ in the US.

With better than expected data out of China yesterday morning and upbeat comments from German Chancellor Angela Merkel, risk appetite was back in the markets benefiting the high yielding risk based currencies at the expense of safe haven flows.

Sentiment improved at the start of the trading week and month by better than expected Chinese manufacturing data. The final reading of the HSBC China purchasing managers' index (PMI) was revised upwards from 49.5 to 50.5 in November and a separate report from the National Bureau of Statistics said its Purchasing Managers Index reached a seven-month high of 50.6 last month.

German Chancellor Angela Merkel said the euro zone might consider writing off part of the Greek debt once the country reaches a budget surplus.

Meanwhile, euro zone finance ministers approved a €39.5 billion aid package for the beleaguered Spanish banks, formally ending months of negotiations.

In the UK, the British Retail Consortium (BRC) reported that ‘like-for-like’ sales rose by 0.4% in November after having fallen by 0.1% in October.

BRC Director Stephen Robertson stated that "Overall, the emphasis continued to be on value with consumers looking at lower-priced gifts. The same caution hit online sales, which delivered their third worst performance of the year. With consumers conscious that there will be a full shopping weekend immediately before Christmas, retailers are holding their nerve and counting on a last-minute rush".

Meanwhile, Markit reported that the UK Manufacturing Purchasing Managers Index in November rose to 49.1 in November with output showing a modest increase but manufacturers maintain a cost-cautious approach to hiring, purchasing and stock levels.

Rob Dobson, Senior Economist at Markit advised that “Purchasing managers have provided the Chancellor with some better-than-expected news on the performance of the manufacturing economy ahead of the Autumn Statement. However, the sector is merely stabilising, suggesting that the economy is still showing no signs of rebalancing towards goods production and exports and that manufacturing is unlikely to help prevent a possible slide back into contraction in the fourth quarter.”

Bank of England official Andy Haldane in a newspaper interview suggested that the financial crisis has been as economically devastating as a world war and may still be a burden on “our grandchildren”.

In the US, the news agenda continues to be dominated by the ‘fiscal cliff’ saga with both the Democrats and Republicans seemingly more interested in point-scoring than in resolving the long standing issue which could sent the US economy back into sharp recession in 2013.