C$ gains as latest positive vaccine news boosts risk appetite - Reuters News

• Canadian dollar rises 0.4% against the greenback
• Loonie trades in a range of 1.3047 to 1.3094
• Price of U.S. oil up 1.3%
• Canadian bond yields rise across a steeper curve

TORONTO, Nov 23 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Monday as the latest positive update by a major drugmaker on the development of a COVID-19 vaccine boosted investor sentiment, with the loonie adding to last week's gain.

Shares rose globally .WORLD and the price of oil CLc1, one of Canada's major exports, was up 1.3% at $42.95 a barrel after AstraZeneca AZN.L said its COVID-19 vaccine could be around 90% effective.

Investors have worried that surging global infections could derail economic recovery. Toronto, Canada's most populous city, has entered into lockdown, with Prime Minister Justin Trudeau saying on Friday that Canada's hospital system could be overwhelmed by a possible quadrupling of new COVID-19 cases by year end. (Full Story)

The Canadian dollar CAD= was trading 0.4% higher at 1.3048 to the greenback, or 76.64 U.S. cents. The currency, which rose 0.3% last week, traded in a range of 1.3047 to 1.3094.

Speculators have cut their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Nov. 17, net short positions had fallen to 20,359 contracts from 21,349 in the prior week.

Britain and Canada struck a rollover trade deal on Saturday to protect the flow of $27 billion-worth of goods and services between them after Brexit, and vowed to start talks on a bespoke agreement next year. (Full Story)

Bank of Canada Deputy Governor Toni Gravelle is due to speak on the stability of Canada's financial system and COVID-19 risks. The central bank will publish his prepared remarks at 2 p.m. (1900 GMT).

Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year yield CA10YT=RR rose 5 basis points to 0.703%.

U.S. manufacturing, services activity expanding rapidly in November - IHS Markit - Reuters News

Nov 23 (Reuters) - U.S. business activity expanded at the fastest rate in more than five years in November led by the quickest pickup in manufacturing since September 2014, a survey showed on Monday in an indication the economy keeps making progress at clambering out of the COVID-19 recession even as infections surge.

IHS Markit's manufacturing and services sector purchasing managers' indexes both topped even the most optimistic forecasts in a Reuters poll that predicted both would level off, offering a counterweight to data suggesting economic momentum was slackening after the third-quarter's torrid rebound from an historic plunge last spring.

The readings also offered one of the first pictures of the state of the U.S. economy after a presidential election three weeks ago in which Democrat Joe Biden beat incumbent Republican President Donald Trump.

"The upturn reflected a further strengthening of demand, which in turn encouraged firms to take on staff at a rate not previously seen since the survey began in 2009," IHS Markit Chief Business Economist Chris Williamson said in a statement.

Markit's manufacturing index climbed to 56.7 from 53.4 in October, above the median forecast in a Reuters economists' poll of 53. A reading above 50 indicates expansion.

The services index, meanwhile, rose to 57.7 - the highest since April 2015 - from 56.9 a month earlier. The Reuters poll had pegged the expectation at 55.0.

Markit's composite index - a blend of the manufacturing and services readings - increased to 57.9 from 56.3 in October. It was also the highest since April 2015.

Markit said its subindex for employment also rose at a record pace as well, potentially welcome news in a U.S. job market that still features more than 10 million people without work who had been employed before the COVID-19 pandemic erupted in the first quarter.

With the election now over and subsequent news of successful COVID-19 vaccine candidates, Markit said survey respondents were the most optimistic about the year ahead since May 2014.

Nonetheless, Markit's survey results about current activity are at odds with a number of other recent readings on the U.S. economy that are far less favorable as a result of a resurgence in COVID-19 that has lead to record after record of new daily infections and rising deaths.

Last week, October retail sales reported from the Commerce Department showed the weakest increase in six months (Full Story), while the Labor Department reported the first weekly increase in new claims for unemployment benefits in a month. (Full Story)

Meanwhile, a clutch of high-frequency indicators tracked by economists for a real-time reading on activity showed further signs of flattening out. (Full Story)

It is clear the U.S. economy in the fourth quarter will come nowhere close to matching 33.1% annualized growth rate in gross domestic product posted in the July to September period, but just how much it has slowed remains less certain. The Atlanta Federal Reserve's "GDPNow" model currently estimates activity in the current quarter expanding at a 5.6% annualized rate.

Euro zone business activity shrinks but vaccine hopes boost optimism - Reuters News

By Jonathan Cable

LONDON, Nov 23 (Reuters) - Euro zone business activity contracted sharply this month as renewed lockdowns forced many firms in the bloc's dominant service industry to close temporarily, although news of possible vaccines boosted hopes for 2021, surveys showed on Monday.

The bloc's economy is on track for its first double-dip recession in nearly a decade as a second wave of the coronavirus sweeps across Europe, a Reuters poll suggested last week. But on Monday, Britain's AstraZeneca said its vaccine could be around 90% effective without any serious side effects. ECILT/EU (Full Story)

Pfizer and Moderna have also developed apparently effective vaccines and Monday's Purchasing Managers' Index (PMI) showed optimism about the year ahead improving to its highest since before the pandemic hit the continent.

Still, IHS Markit's headline flash composite PMI, seen as a good guide to economic health, fell to 45.1 in November from October's 50.0 - the level separating growth from contraction. A Reuters poll had predicted a shallower dip to 46.1.

"The drop in the composite PMI to well below 50 adds to the evidence that the euro zone economy will post another sizeable contraction in Q4," said Jack Allen-Reynolds at Capital Economics.

"But with vaccines looking increasingly likely to be rolled out in the first half of next year, the surveys show greater optimism about 2021."

Vaccine hopes, and expectations of more stimulus from the European Central Bank next month, meant optimism improved. The composite future output index jumped to 60.1 from 56.5, its highest since February.

Shares and oil prices rose on Monday while the dollar softened. MKTS/GLOB

FACTORIES TO THE RESCUE

Services activity in Germany, Europe's largest economy, contracted faster this month after lockdown measures were introduced while in France the economy shrank at the fastest pace since May, sister surveys showed. (Full Story) (Full Story)

In Britain, which is outside the euro zone and European Union and has suffered the highest COVID-19 death toll in Europe, a new wave of coronavirus restrictions hammered the huge services sector. GB/PMIS (Full Story)

A PMI covering the euro zone's service industry fell to 41.3 from 46.9, its weakest reading since the height of the first wave of the pandemic and well below the 42.5 predicted in a Reuters poll.

With demand drying up despite price cuts and backlogs of work being run down, firms reduced headcount for a ninth month in succession. The services employment index fell to 48.1 from 48.5.

However, manufacturing has fared better as many factories have remained open. Its flash PMI held well above the breakeven mark at 53.6 in November, albeit below October's 54.8. The Reuters poll had predicted 53.1.

An index measuring output, which feeds into the composite PMI, fell to 55.5 from 58.4. Demand also eased - the new orders index sank to 54.0 from 58.7 - indicating that the downward trend may continue.

"The good news is that the fall was cushioned by a strong manufacturing sector. Buoyed by Germany, the manufacturing PMI merely indicated a slowing of output growth, but not contraction," said Bert Colijn at ING.

"Still, as the second part of the W-shape has just started, a long and uncertain road to recovery remains ahead."

COVID-19 lockdown hurts Germany's services sector - PMI - Reuters News

BERLIN, Nov 23 (Reuters) - German service sector activity has contracted faster this month after restrictive measures were introduced to tame a second wave of COVID-19 infections, a survey showed on Monday.

IHS Markit's flash services Purchasing Managers' Index (PMI) fell to 46.2 from 49.5 in October, sliding further below the 50 mark that separates growth from contraction and marking a second straight month of decline. A Reuters poll had predicted a drop to 46.3.

The survey also showed that activity in the manufacturing sector continued to grow, albeit at a slightly slower pace, offering support to an economy otherwise forecast to post its deepest recession this year since World War Two.

Activity in the factory sector eased to a still-healthy 57.9 from 58.2 in October, beating a forecast for a drop to 56.5.

"The resilience being exhibited by the manufacturing sector, which the survey shows is benefiting for growing sales to Asia in particular, supports our view that any downturn in the final quarter is expected to be far shallower than those seen in the first half of the year," said IHS Markit's Associate Director Phil Smith.

"The positive news surrounding the development of COVID vaccines has helped lift the spirits among German businesses, many of which are now hoping for a return to normality over the next 12 months," he added.

"This looks to have been a supportive factor in the latest employment figures, which show factory jobs numbers moving closer to stabilisation and services payrolls edging higher."

Germany introduced a "lockdown light" on Nov. 2 to contain the spread of COVID-19.

IHS Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, edged down to 52.0 from 55.0 in October.

UK economy shrinks as new lockdown shuts services firms -PMI - Reuters News

• UK composite PMI below 50 for first time since June
• Decline less severe than forecast, smaller than euro zone
• Forward-looking indicator highest since March 2015
• New lockdown reduces shopper numbers by more than half
• BoE's Haldane sees brighter prospects for 2021

By William Schomberg

LONDON, Nov 23 (Reuters) - British business activity has contracted in November as a new wave of coronavirus restrictions hammered the huge services industry, but news of possible vaccines has sharply boosted hopes for 2021, a survey showed on Monday.

An early "flash" reading of the IHS Markit/CIPS UK Composite Purchasing Managers' Index (PMI), a gauge of private sector growth, tumbled to a five-month low of 47.4 in November from 52.1 in October.

It is the first time the index has gone below the 50.0 growth threshold level since June.

The decline was smaller than a slump to 42.5 forecast in a Reuters poll of economists, however, and less severe than the drop in the euro zone. (Full Story)

The forward-looking component of the PMI hit its highest in more than five years, boosted by progress on COVID-19 vaccines.

Bank of England Chief Economist Andy Haldane said on Monday he hoped the economy would be "turning a leaf" next year, but warned that some long-term damage was inevitable. (Full Story)

Britain's economy is widely expected to contract in the fourth quarter - albeit by less than it did around the time of the first coronavirus lockdown - after Prime Minister Boris Johnson ordered a four-week lockdown for England.

Other parts of the United Kingdom have also imposed restrictions on businesses, including in hospitality and other face-to-face activities.

Those closures helped to push the services PMI to 45.8 from 51.4 in October.

But manufacturing, which was largely unaffected by the latest lockdown, accelerated, with its PMI rising to 55.2, the joint-highest level since 2018.

"The two-speed nature of the recovery is increasingly clear," J.P. Morgan Asset Management strategist Hugh Gimber said. "The manufacturing sector continues to tick along at a healthy pace, while new lockdowns have slammed the brakes on the nascent recovery in the service sector."

The approach of a possible trade shock at the end of next month, when Britain's post-Brexit transition deal with the European Union will expire, prompted clients of British factories to increase their orders to build up stocks.

That in turn lead to a sharp lengthening of supplier delivery times because of severe delays at British ports.

Job losses across the private sector accelerated, although some of the reduction in employment was due to companies taking advantage of the government's extended jobs protection scheme.

Separate figures on Monday showed the number of people visiting shops in Britain last week was 55% lower than a year earlier.