Market movers today
Today is a very busy day in terms of economic data releases. This morning, PMI manufacturing indices for many European countries, including Norway and Sweden (see overleaf), are due out.
In the euro area, we get unemployment data for February and preliminary HICP inflation at 11:00 CEST. Although we still expect core inflation to climb higher in 2019, we expect the March core inflation print to remain at 1.0% y/y, as the Easter effect will exert downward pressure on service price inflation, which might be even more pronounced following the methodological changes to German package tours. For headline inflation we see scope for a rise to 1.7% y/y, driven by increasing energy prices.
In the US, there are plenty of data releases as well. At 14:30 CEST, retail sales are due out, which will be interesting given the weakness in recent months. We expect core retail sales rose +0.5% m/m in February. At 16:00, ISM manufacturing for March is due out, which, given the regional PMIs, may increase marginally. US manufacturing is not immune to what happens in the rest of the world and we expect it to move lower over the next 3M.
In the UK, there will be another round of indicative Brexit votes today. Last week, a permanent customs union or a second EU referendum were closest to getting a majority.
Selected market news
Over the weekend and this morning, China published its official PMI and the Caixin PMI. Both indices surprised on the upside, with the official PMI rising to 50.5 from 49.2 last month, and the Caixin PMI rising from 49.9 to 50.8. It was the biggest increase since 2012 in the official PMI. Both new orders and new export orders rose to a six-month high though new export orders are still below 50. We believe we will continue see a rebound in Q2 data, that tends to correlate with commodity prices, and we have seen higher prices for both metals and oil this year. Hence, the PMIs are encouraging. We also expect further monetary easing to add to the stimulus and thus support activity in Q2. The better PMI data came after positive news stories last week that the Chinese-US trade talks are moving forward. We published our China Weekly Letter on Friday, where we argued that we could see a ‘signing meeting’ between Xi and Trump in late April.
The Asian markets have reacted positively to the growth news and the major equity indices are in green. USD/JPY is also higher, trading above 111, and 10Y US treasury yields opened some 3bp higher at 2.43%. In Turkey, Erdogan and his AK party lost several key cities in Sunday’s election, and the lira remains under pressure after last week’s turmoil.
Finally, on Brexit, EU’s Junker warned over the weekend that the EU’s patience will not last forever. The voting continues this week in the UK parliament. The government must now make a request to the EU at the extraordinary summit on 10 April or leave with a hard Brexit on 12 April.
