Euro zone sentiment drops in November as second COVID wave strikes

Euro zone economic sentiment fell for the first time in seven months in November as a second COVID-19 wave struck the continent, depressing the mood in all sectors, particularly those hardest hit by lockdowns such as services and retail.

The European Commission's monthly survey showed sentiment in the 19 countries sharing the euro fell to 87.6 points from 91.1 in October, a shade above market expectations of a decline to 86.5 points.

The survey is typically conducted in the first two to three weeks of the month, meaning they relate to the mood after a series of lockdowns were announced, including in the euro zone's two largest economies, Germany and France.

"After the partial recovery of sentiment between May and September and the broad sideways movement in October, the drop is the first one since sentiment fell sharply in the first COVID-19 wave," the European Commission said in its report. The decline of sentiment, it said, was fuelled by diving confidence in retail, services and among consumers. Sentiment in industry and construction, which have been largely spared in lockdowns, suffered only mild declines.

In all cases, the view of future business worsened. Sentiment in services, the euro zone economy's biggest sector producing some two thirds of gross domestic product, slipped to -17.3 from - 12.1. Economists polled by Reuters had expected a fall to -15.5 points.

Sentiment among consumers fell to -17.6 in November from -15.5 points in October, in line with the flash estimate released last week. The mood in industry dropped to -10.1 from -9.2, just above expectations of a fall to -10.5. Inflation expectations in industry declined to 0.2 points from 0.7 but rose among consumers to 15.4 points from 13.3 in October. Both were below the average values since 2000.

Meanwhile, Oil prices were mixed on Friday but remained on course for a fourth straight week of gains ahead of an OPEC+ meeting early next week. Brent crude for January rose 28 cents, or 0.6%, to $48.08 a barrel by 0913 GMT and the more active February contract gained 32 cents to $48.11.

West Texas Intermediate, meanwhile, was down 40 cents, or 0.9%, at $45.31. Both benchmarks are up about 7% over the week after encouraging news on potential COVID19 vaccines from AstraZeneca and others. However, questions have been raised over AstraZeneca's "vaccine for the world", with several scientists sounding caution over the trial results.

"While a successful vaccine rollout should break the link between infection and mobility, even then global oil demand will likely only reach its pre-pandemic run rate by mid-2022," JP Morgan said.