FRANCE DATA: Nov Flash PMIs: Strong Services But Weak Employment Still Noted
A return to expansion for the services sector helped the French composite PMI handily exceed expectations at 49.9 (vs 48.1 cons, 47.7 prior). That's the highest level in 15-months.
Services returned to expansion for the first time since August 2024 at 50.8 (vs 48.5 cons, 48.0 prior). However, manufacturing disappointed despite an increase in new export sales for the first time since February 2022 (47.8 vs 49.0 cons, 48.8 prior).
Despite the improvement in new orders, employment fell in both monitored sectors. This extends a recent run of soft labour market metrics in French hard data up to Q3.
Key notes from the release
- "Stronger sales performances reportedly lifted output, according to survey respondents. Although the rise was only marginal, it was enough to almost fully offset November’s quicker decline in factory production."
- "There were divergent trends in new business at the sector level. While goods producers registered a further weakening of demand, there was a slight improvement for services"..."new export business increased for the first time since February 2022 amid a return to growth in manufacturing sector new export sales"
- "Private sector payroll numbers slipped into contraction, ending a three-month sequence of growth. Employment fell across both monitored sectors, underlying data showed, although job losses were sharper among goods producers as the decline across services was only fractional."
- "Positively, French businesses’ expectations for activity levels over the next 12 months improved from October"
- "The overall rate of input price inflation accelerated sharply from October amid reports of increased metals prices (such as copper and aluminium) and greater wage expenses. Output charges were unchanged, however, with a lack of pricing power evident across both the manufacturing and service sectors"
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ITALY: Meloni Talks On Ukraine, Green Deal, Russian Assets Ahead Of EUCO
Delivering the customary address to the Senate ahead of the European Council summit, PM Giorgia Meloni speaks on several issues set to come up in the 23 October leaders' meeting in Brussels.
- Amid a drive by some countries to utilise ~EUR140bln in frozen Russian assets held in the EU to help fund Ukraine's reconstruction, Meloni says "Further measures concerning Russian frozen assets must respect international law, [and] safeguard [the] financial stability of the eurozone." Comments would appear to signal the Italian gov't is more circumspect on the prospect than others such as Germany.
- Meloni: "Italy calls on the EU to make the flexibility clause aimed at boosting defence spending permanent." The current exemption allows for increased defence spending beyond the EU's fiscal rules up to 1.5% of GDP for four years.
- On support for Ukraine: "Italy has already made it clear that it does not envisage sending soldiers to Ukrainian territory. Our position has not changed."
- On EU's green transition: "We call on the European Commission to correct a number of risky choices made in the past with the Green Deal." In draft conclusions seen by MNI's Policy team, there does appear to have been some movement on the issue of Green Transition amid pressure from national capitals (see 'MNI: EU Summit Draft Shows Pragmatism On Green Transition', 20 Oct).
- Later today, at ~16:15CET (10:15ET, 15:15BST), Meloni will deliver a similar address to the Chamber of Deputies.
STIR: ECB-dated OIS Exhibit Little Meeting-specific Conviction
EUR STIRs see light dovish spillover from SONIAs following this morning’s soft UK inflation report, but aggregate moves are very modest.
- ECB-dated OIS now price 20bps of easing through September 2026, up from just under 10bps at the start of this month.
- There’s very little meeting-specific conviction in this pricing though. There’s virtually no implied probability of a cut at next week’s meeting, and less than 6bps of sequential cuts priced into each of the seven subsequent meetings.
- If another cut is delivered this cycle, markets lean in favour of such a move coming at a meeting with updated macroeconomic projections – highlighted by the negative Oct/Dec/Feb, Feb/Mar/Apr and Apr/Jun/Jul butterfly spreads.
- Euribor futures are flat to +1.5 through the blues.
- Regional focus remains on Friday’s flash October PMIs. The remainder of today’s calendar is light – we don’t expect much new from ECB’s de Guindos or Lagarde.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Oct-25 | 1.924 | -0.3 |
| Dec-25 | 1.887 | -4.0 |
| Feb-26 | 1.861 | -6.6 |
| Mar-26 | 1.805 | -12.2 |
| Apr-26 | 1.785 | -14.2 |
| Jun-26 | 1.748 | -17.9 |
| Jul-26 | 1.742 | -18.6 |
| Sep-26 | 1.726 | -20.1 |
| Source: MNI/Bloomberg Finance L.P. | ||
EU-RUSSIA: Slovak PM Hints He Will Not Veto 19th Sanctions Package
Reuters reports comments from Slovak PM Robert Fico, claiming that his gov't can support the EU's 19th sanctions package against Russia, "If we see the demands we pushed for in the summit conclusions." As Euronews reported on 20 Oct, "The latest conclusions from the upcoming EU summit add more detailed references to energy prices and the automotive sector, the two issues that Slovak PM Robert Fico had raised as condition [sic] for lifting his veto."
- Fico has not raised objections to the actual provisions of the proposed 19th package of sanctions, which are largely intended to hit Russian LNG flows, oil infrastructure, its "shadow fleet" of ageing tankers and crypto platforms, as well as impact the movements of Russian diplomats.
- Instead, the Slovak PM has demanded that the EU "substantially" discuss high energy prices, the struggling European auto sector, and EU competitiveness. Fico argued these topics are often left to the end of any conclusions and not given enough time for discussion when compared to the war in Ukraine.
- As MNI's Policy team reported previously, "European leaders will signal a more pragmatic approach on the green transition in order to mute its impact on industrial competitiveness when they meet in Brussels later this week, draft summit conclusions show." (see 'MNI: EU Summit Draft Shows Pragmatism On Green Transition', 20 Oct).
- The gov't in Vienna withdrawing Austria's objection to the sanctions could pave the way for a vote to implement the latest package soon.
