In focus today
In the US, the Conference Board’s consumer confidence survey for March will be released. Earlier, a similar preliminary survey from the University of Michigan showed a clear weakening in consumer confidence due to political uncertainty. NY Fed’s Williams will give remarks in the afternoon.
In Germany, we will receive the IFO growth indicator. It will be interesting to see if the release mirrors the positive surprise in the manufacturing PMI or the downtick in services counterpart.
In Sweden, February PPI data will be released this morning. Focus will be on the subcomponent that has the closest correspondence to CPI, the so-called domestic supply prices (mix of import and home market prices) for consumer goods.
In Hungary, the central bank will announce its policy rate. We and consensus expect the bank to keep the rate unchanged at 6.50%.
In China, PBoC will set the policy rate, the 1-year Medium-Term Lending Facility rate. We expect it to be unchanged again as we believe the central bank will continue to be sidelined for now until we move closer to another Fed cut.
Economic and market news
What happened yesterday
In the euro area, PMIs came in slightly weaker than expected in March, with the composite PMI rising to 50.4 (cons: 50.7) from 50.2. The rise was driven by a stronger-than-expected uptick in the manufacturing sector to 48.7 (cons: 48.2), while the service sector disappointed with a decline to 50.4 (cons: 51.1, prior: 50.6). The composite PMI signals that the euro area economy has had a positive start to 2025 and likely grew around 0.2% q/q. For the ECB’s rate decision in April, the PMI data does not clearly point in either direction, with market pricing staying unchanged.
In the US, March Flash PMIs came in at 49.8, down from 52.7 in February. This indicates a contrasting trend compared to the euro area. In line with the weaker signals from the regional Fed indices, the manufacturing PMI has plunged back to contractionary territory amid tariff uncertainty – reflected by input prices rising sharply and production, domestic orders and employment weakening. However, the services index rebounded strongly to 54.3 (from 51.0), moving higher across the board, spurring the uptick in the composite index. Overall, the signals are rather mixed, yet it is positive that tariff uncertainty has not yet affected broader services activity, despite the pessimistic consumer sentiment surveys. Following the release, EUR/USD ticked lower. President Donald Trump announced Monday that auto tariffs are on the horizon but suggested that not all planned duties will take effect on 2 April, with some nations potentially receiving exemptions. Hence, significant uncertainty remains regarding Trumps tariffs.
In the UK, preliminary PMIs for March exceeded expectations, leading to a drop in EUR/GBP upon release. The composite index rose to 52.0 (cons: 50.5), driven by a rise in services to 53.2 (cons: 51.0) with more pronounced weakness in manufacturing at 44.6 (cons: 47.2). Despite a weak February print, employment indicators are showing improvement although from a low level and should be read with caution given the impending rise in employers’ national insurance contribution from April. Price pressures are easing in the service sector, while manufacturing is more of a mixed bag. Overall, the release was positive news for the BoE, supporting a gradual quarterly cutting cycle.
In geopolitics, following Sunday’s discussions in Saudi Arabia, US and Russian officials engaged in further talks on Monday, aiming to establish a Black Sea maritime ceasefire before negotiating a broader ceasefire in Ukraine. Despite US optimism, ongoing strikes by Russia and Ukraine underscore the fragile nature of the proposed 30-day ceasefire, while European powers remain sceptical about Putin’s willingness to make real concessions. Today delegators from the US and Ukraine are scheduled to meet in Saudi Arabia.
Equities: Tariff relief made US stocks rally yesterday, with S&P 500 1.8%, Nasdaq 2.3% and small cap Russell 2000 2.6%. Investors bought the dip with Mag 7 leading the market, with this being the best day for the group since January and especially Tesla the standout up 12%. Meanwhile, European equities were unchanged although rosy PMIs would have suggested otherwise. However, underneath risk-on was evident here as well with cyclical sectors (especially banks and materials) outperforming defensives. Optimism is fading this morning though with Asian equities wavering and US and European stock futures pointing lower.
FI&FX: US equities rallied and S&P500 closed back above the 200dma on potential tariff de-escalation. US yields tracked higher under minor flattening and also European yields rose across the curve, with a minor spread tightening to peripherals. EUR/USD is hovering around 1.08 after yesterday’s mixed bag of PMI’s, and the positive risk sentiment weighed on the Yen. Canada’s PM Carney has called for a snap election April 28, but as this was heavily expected the reaction in CAD has been muted. The NOK found support in rising oil prices, with EUR/NOK trading below 11.40. Neighbouring SEK had a strong finish to yesterday’s session, breaking through 10.90 and currently trading at its lowest level since late-2022.
