Market movers today
Today we have a lot of important data releases across markets, with a slight disappointment in PMIs out of China (see below) setting the scene for the day.
In the euro area, we are due to get the Q1 GDP print, which we expect to show how much the weak manufacturing sector has dragged down growth at the start of the year. The service sector has been strong on the back of rising domestic demand though and we expect a 0.3% q/q print. Also in the euro area, the German inflation print will give us a glimpse of where Friday’s euro-area inflation print is heading. Last month, inflation fell on the back of seasonal effects from the timing of Easter – we expect the print to rebound on the back of this effect and due to rising energy prices.
The Hungarian central bank (MNB) is due to announce its rate decision today. At the March meeting, the central bank kept its key rate unchanged and hiked the overnight deposit rate by 10bp to -0.05% to respond to hawkish market expectations. We expect the loose monetary policy to continue and look for no key rate changes today but the prospect of further implicit tightening through liquidity tools remains.
In the Scandi region, we are due to get retail sales and unemployment data from Norway and data on house-price developments in Denmark.
Selected market news
Overnight, Chinese PMIs were weaker than expected: official (NBS) manufacturing PMI fell to 50.1 in April (50.5 in March), short of expectations it would be unchanged after a significant jump in March. The fall was broad based, with the new orders sub-index down a little, however, the export orders component rose, suggesting external demand may be improving somewhat. The non-manufacturing index also fell, to 54.3 (54.8 in March), disappointing against expectations of a small rise. The private (Caixin) manufacturing PMI fell to 50.2 (50.8 in March) after a strong rebound in previous months – its non-manufacturing counterpart is not due until next week. Overall, while Chinese PMIs disappointed and hinted that at this stage we have nothing more than a fragile stabilisation in Chinese activity, we stress (i) some weakness was to be expected after the rebound in recent month(s), (ii) all indices are above the 50 boom/bust level and (iii) an extensive trade deal in Q2 should help stabilise China into H2.
Ahead of the PMI disappointments out of China, risk sentiment was off to a good start in US hours with S&P 500 rising just shy of the 2,950 mark and reaching a new record close, as US data on Monday afternoon left the impression of muted inflation amid healthy consumer spending. However, in US after-hours trading, Google conglomerate Alphabet missed revenue estimates. In the Asian session, Korean electronics giant Samsung missed analyst expectations. US Treasury yields initially rose and ended the day a few basis points higher across the curve, with the sell-off concentrated at the long end. USD weakened and EUR/USD held up towards the 1.12 mark despite Chinese weakness. Crude oil was steady around USD71.50/bbl for Brent.
Next up is the Fed, which is widely expected to keep rates unchanged but its description of the economy and what it needs could be key in setting the scene for risk assets.
