Market movers today
Later today, we are due to get the minutes from the 14-15 March FOMC meeting. We will in particular look for discussions on t he Fed’s desire t o begin shrinking it s balance sheet, as Fed Chair Janet Yellen said at the press conference that the FOMC members discussed it at the meeting.
As a warm-up for Fri day’s labour market report in the US, ADP employment for March is due out today. Although not a perfect predictor, ADP tends to give a relat ively good idea of what to expect from the official jobs report.
The UK PMI service index released later today will attract attention after it declined in both January and February, suggest ing GDP growth slowed in Q1 17 to around 0.3 -0.4% q/q – down from 0.7% q/q. The service confidence indicator suggests the PMI service index could have moved up marginally to 53.7 in March, which, however, would not change the impression we have that growth slowed at the beginning of 2017.
Selected market news
Yesterday was the second day where the ECB QE purchases of bonds were reduced from EUR80bn a month in Q1 to EUR60bn a month. As it was the case on Monday, it did not change the recent st rong fixed income sent iment and the 10-year German government benchmark bond yield dropped to around 25bp. In addit ion, the market cont inued to price out ECB rate hikes in 2018. The ECB QE data for March was released yesterday and it confirmed a cont inued st rong presence in the short end of the German curve, with an average maturity of German PSPP purchases of 4.7 years.
Yesterday in the UK, PMI const ruct ion fell marginally to 52.2 in March from 52.5 in February. The figures have been quite stable at this level since September 2016.
T wo snap polls aft er yest erday’s four-hour French President ial Elect ion debate rated only the Nat ional Front candidate, Marine Le Pen, the fourth most convincing candidate, with roughly half the endorsement of front -runner Emmanuel Marcon, see Bloomberg. Emmanuel Macron and Le Pen are st ill head to head in the polls for the first round (Bloomberg Composite of pools around 25% for both) and Emmanuel Macron’s Oddschecker-implied probability indicator of winning the run-off remains above 60%. Current ly, the 10-year French government benchmark bond yield spread to Germany is around 66bp.
It has been a calm session in global financial markets this morning. Asian stock markets have been moving sideways mainly and in fixed income markets, changes in the US 10-year government benchmark bond yield have been subdued since yesterday. Brent oil has climbed to around USD54.4/bbl at the t ime of writ ing. Overnight , Markit PMI service figures for March in Japan came out at 52.9, which is the sixth consecut ive month of expansion and the highest reading since August 2015.
