EU PMI Readings Handily Beat Expectations, Question Of Whether It Foreshadows Green Shoots Of Recovery?

Notes/Observations

• Risk aversion sentiment prevalent in session but somewhat offset by better EU data
• UK Feb CPI data softer than expected
• Major European March Preliminary PMI readings beat expectations but mainly brushed off as lockdowns continue in region (Beats: France, Germany, Euro Zone and UK)
• Oil higher after dust storm caused large container ship to be stuck; could be several days to resolve

Asia:

• Australia Mar Preliminary PMI Manufacturing registered its 10th consecutive expansion (57.0 v 56.9 prior)
• Japan Mar Preliminary PMI Manufacturing registered its 2nd straight expansion (52.0 v 51.4 prior)
• BOJ Jan Minutes (two meetings ago) Members agreed BOJ must ease without hesitation if needed with eye on pandemic fallout
• BOJ Gov Kuroda: BOJ will carry on with powerful mon easing, it will take some time to 2% PX target
• China said to be far behind on the two-year targets in its US trade deal and only purchase about one third of US goods required under the trade agreement
• North Korea reportedly fired short range missiles last weekend

Coronavirus:

• Total global cases 124.1M (+0.4% d/d); total deaths: 2.73M (+0.4% d/d)
• UK PM Johnson stated that he hoped to be able to say more about travel rules on April 5th; UK did not believe in vaccine blockades
• EU said to be looking to slow covid vaccine exports for 6 weeks, would impact all vaccine manufactures; most likely to impact Israel, Canada and UK
• Hong Kong halted the Biontech vaccine after receiving a written notice from Fosun Pharma warning there were multiple package defects related to vial caps of the vaccine doses

Europe:

• EU and China trade talks in Brussels said to be canceled after EU placed sanctions on China officials

Americas:

• Fed Chair Powell testimony noted that the Fed was strongly committed to price stability mandate. Inflation might rise this year on base effects and demand but did not expect it to be large or persistent
• Fed’s Bullard (non-voter, dove) stated that saw 2021 GDP growth of 6.5% with unemployment down to 4.5%
• Fed’s Brainard stated that the economy remained far from achieving Fed job and inflation targets; upside for economy was bulk of fiscal aid was being spent and not saved
• Treasury Sec Yellen testified that the White House planned to put forward a proposal for sustainable infrastructure and jobs. Changes to the tax structure would help to pay for those programs. No current plans to lengthen the maturity of govt debt
• BOC’s Gravelle: The Bank would require additional tools in order to pursue housing in the Apr MMR but there’ll be more focus in May’s MMR

Energy:

• Weekly API Crude Oil Inventories: +2.9M v -1.0M
• Suez Canal blocked for several hours as a large container ship that became stuck amid high winds and a dust storm

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.27% at 422.48, FTSE -0.16% at 6,688.40, DAX -0.43% at 14,598.70, CAC-40 -0.34% at 5,925.34, IBEX-35 -0.87% at 8,317.00, FTSE MIB -0.16% at 24,074.50, SMI -0.17% at 11,079.49, S&P 500 Futures +0.38%]
• Market Focal Points/Key Themes: European indices open broadly lower, but moderated losses as the session progressed (AEX the notable exception trading higher); lower risk sentiment initially attributed to difficulties in vaccine roll-out, with the turn towards more optimism followed by better than expected PMI data; the sole sector starting the session in the green was technology; while financials and consumer discreationary sectors among those leading to the downside; tech sector buoyed by Intel announcement yesterday; Carrefour buys BIG retail in Brazil; Mitsui reportedly looking to expand stake in Collahuasi mine; Apax reportedly close to agreeing on deal for Rodenstock; Leonardo delays DRS IPo due to market conditions; earnings expected in the upcoming US session include General Mills and Winnebago

Equities

• Industrials: Diploma [DPLM.UK] +2% (earnings), Leonardo [LDO.IT] -7% (postpones IPO)
• Technology: ASML [ASML.NL] +6% (Intel strategy), Softcat [SCT.UK] +12% (earnings)
• Utilities: E.ON [EOAN.DE] -1% (earnings)

Speakers

• Italy PM Draghi stated that President Biden’s video presence at upcoming EU Summit to relaunch ties between EU-US. Needed to begin planning of reopening Italy and schools will be first
• Iceland Central bank Policy Statement noted that inflation in the near-term outlook had likely worsened but was seen to begin tapering in the spring. Indicators suggested a continuing recovery in 2021
• Germany IFO Institute cut its 2021GDP forecast from 4.2% to 3.7% while raising its 2022 GDP forecast from 2.5% to 3.2%
• German Chancellor Merkel to discuss lockdown measures with state leaders on Wed (Mar 24th) after Govt imposed an Easter Lockdown to check the recent Covid Surge
• Turkey President Erdogan stated that market fluctuations did not reflect economy fundamentals. Urged global investors to maintain trust in the country
• RBA Dep Gov Debelle stated that unemployment rate was a lot lower than we had anticipated but still believed the recovery is going to be bumpy and uneven
• Thailand Central bank (Policy Statement noted that the vote to keep policy steady was unanimous. Reiterated stance that monetary policy to remain accommodative and kept rates on hold to preserve policy space. Economy needed support from low rates and prepared to use additional monetary tools if necessary. Domestic economy faced downside risks. It cut its GDP outlook due to pandemic and lower number of tourists. Reiterated stance to closely monitor THB currency (Baht); reiterated stance that recent moves were in-line with regional peers . It saw inflation back to target in mid-2021
• China Foreign Ministry spokesperson Hua Chunying stated that nations must drop the Xinjing issue and focus on their own problems. EU wantonly provoked China with Xinjiang sanctions
• Fed’s Bostic (voter) saw the Fed lifting rates in H1 2023, expected US economy to grow 6% in 2021. Expected inflation to overshoot target for a while but added it would be a fare amount of time before Fed pares bond buying. Overall financial conditions remained very accommodative

Currencies/Fixed Income

• USD was benefiting from safe-haven flows as pandemic concerns and vaccine snafus hamper confidence of a quick rebound in the global economy. Risk assets were coming under pressure as European countries had been widening lockdown measure
• EUR/USD tested 4-month lows at 1.1812 before consolidating its loss. Major European March Preliminary PMI readings beat expectations but mainly brushed off as lockdowns continue in region. Major European pairs were off their worst levels as perhaps the data suggested green shoots of a recovery.
• GBP was lower in the aftermath of softer CPI data for Feb. GBP/USD hit a 2-month low at 1.3675 before rebounding to above 1.37 area by mid-session

Economic data

• (FI) Finland Feb PPI M/M: 1.7% v 1.4% prior; Y/Y: +2.0% v -0.8% prior
• (UK) Feb CPI M/M: 0.1% v 0.5%e; Y/Y: 0.4% v 0.8%e; CPI Core Y/Y: 0.9% v 1.4%e; CPIH Y/Y: 0.7% v 1.0%e
• (UK) Feb RPI M/M: 0.5% v 0.6%e; Y/Y: 1.4% v 1.5%e RPI-X (ex-mortgage interest payments) Y/Y: 1.6% v 1.7%e; Retail Price Index: 296.0 v 296.5e
• (UK) Feb PPI Input M/M: 0.6% v 0.6%e; Y/Y: 2.6% v 2.6%e
• (UK) Feb PPI Output M/M: 0.6% v 0.3%e; Y/Y: 0.9% v 0.3%e
• (DK) Denmark Mar Consumer Confidence Indicator: -5.0 v -5.2 prior
• (TR) Turkey Mar Consumer Confidence: 86.7 v 84.5 prior
• (TH) Thailand Central Bank (BoT) leFT Benchmark Interest Rate unchanged at 0.50% (as expected)
• (CZ) Czech Mar Consumer Confidence Index: -22.0 v -21.0 prior; Business Confidence: -1.3 v +2.1 prior; Composite Index (Consumer & Business Confidence): -5.4 v -2.6 prior
• (ZA) South Africa Feb CPI M/M: 0.7% v 0.9%e; Y/Y: 2.9% v 3.1%e (annual pace below target for 1st time in 7 months)
• (ZA) South Africa Feb CPI Core M/M: 0.6% v 0.7%e; Y/Y: 2.6% v 2.6%e
• (FR) France Mar Preliminary Manufacturing PMI: 58.8 v 56.3e (4th straight expansion and highest since Feb 2018); PMI Services: 47.8 v 45.5e; PMI Composite: 49.5 v 47.2e
• (DE) Germany Mar Preliminary Manufacturing PMI: 66.6 v 60.5e (9th month of expansion and record high); PMI Services: 50.8 v 46.5; PMI Composite: 56.8 v 51.6e
• (IS) Iceland Central Bank (Sedibanki) left the 7-Day Term Deposit Rate unchanged at 0.75%
• (EU) Euro Zone Mar Preliminary Manufacturing PMI: 62.4 v 57.6e (9th month of expansion and record high); PMI Services: 48.8 v 46.0e; PMI Composite: 52.5 v 49.1e
• (UK) Mar Preliminary Manufacturing PMI: 57.9 v 55.0e (10th straight expansion and highest reading since Nov 2017); PMI Services: 56.8 v 51.0e; PMI Composite: 56.6 v 51.4e
• (UK) Jan ONS House Price Index Y/Y: 7.5% v 8.3%e

Fixed income Issuance

• (IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills

Looking Ahead

• 06:00 (GR) Greece Q4 Unemployment Rate: No est v 16.2% prior
• 06:00 (EU) Daily Euribor Fixing
• 06:00 (EU) ECB, BOE and SNB hold weekly 7-day and 3-month USD Liquidity Tender
• 06:00 (SE) Sweden to sell combined SEL5.0B in 2026 and 2031 Bonds
• 06:00 (NO) Norway to sell NOK3.0B in 3% Mar 2024 Bonds
• 06:10 (EU) Daily ECB Liquidity Stats
• 06:30 (DE) Germany to sell €4.0B in 0% Feb 2031 Bunds
• 07:00 (US) MBA Mortgage Applications w/e Mar 19th: No est v -2.2% prior
• 07:00 (CZ) Czech Republic to sell 2027, 2029 and 2033 bonds
• 07:30 (UK) DMO to sell £350M in 0.125% Nov 2056 inflation-linked Gilts
• 07:45 (US) Daily Libor Fixing
• 08:00 (CL) Chile Feb PPI M/M: No est v 1.1% prior
• 08:00 (MX) Mexico Feb Unemployment Rate NSA (unadj): 4.4%e v 4.7% prior
• 08:00 (UK) Weekly PM Question time in House
• 08:30 (US) Feb Preliminary Durable Goods Orders: 0.6%e v 3.4% prior; Durable Goods (ex-transportation: 0.5%e v 1.3% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.5%e v 0.4% prior; Capital Goods Shipments (non-defense/ex-aircraft): -1.0%e v +1.8% prior
• 09:00 (UK) Daily Baltic Dry Bulk Index
• 09:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-Week Repurchase Rate unchanged at 0.25%
• 09:45 (US) Mar Markit Preliminary Manufacturing PMI: 59.5e v 58.6 prior; PMI Services: 60.1e v 59.8 prior; PMI Composite: No est v 59.5 prior
• 10:00 (US) Fed Chair Powell before Senate banking committee
• 10:30 (US) Weekly DOE Oil Inventories
• 10:45 (UK) BOE to buy £1.48B in APF Gilt purchase operation (7-20 years)
• 11:00 (EU) Euro Zone Mar Advance Consumer Confidence Index: -14.5e v -14.8 prior
• 11:30 (US) Treasury to sell 2-year FRNs
• 12:00 (HU) Hungary Central Bank’s Pleschinger
• 13:00 (US) Treasury to sell 5-year note
• 13:35 (US) Fed’s Williams
• 15:00 (US) Fed’s Daly
• 19:00 (US) Fed’s Evans
• 22:00 (KR) South Korea Feb Department Store Sales Y/Y: No est v -6.3% prior; Discount Store Sales Y/Y: No est v -11.7% prior
• 23:30 (TH) Thailand Feb Customs Trade Balance: +$1.5Be v -$0.2B prior; Exports Y/Y: -2.4%e v +0.4% prior; Imports Y/Y: +11.1%e v -5.2% prior
• 23:35 (JP) Japan to sell 40-Year JGB Bonds