The UK government has announced that election campaigning is suspended today
|Market movers today
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In the euro area, focus will be on the PMI figures and whether they can cont inue upwards, in cont rast to the weakness in manufacturing PMIs observed in the US and China in recent months. We expect a minor slowdown in the euro area PMIs, but note that the figures should remain at a high level and st ill show cont inued expansion.
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The German ifo business confidence will also at t ract at tention today. Ifo est imates fell slight ly in April to 105.2 from 105.7 in March. We may see a further small decline in German business expectat ions to 104.9 due to a softening of the business cycle indicators in the US and China, although there could be tailwind from the outcome of the French election.
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In the UK, focus will be on the nature and impact of the terrorist at tack in Manchester. The UK government has announced that election campaigning is suspended today.
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In the US, the Markit PMI (composite) is expected to show a modest increase as the current level only reflects around 1% GDP growth, which is below our expectat ion of a current underlying growth rate of around 2%. This would just ify a modest rise in Markit PMI. US new home sales are est imated to show a small decline in April after some st rong months in early 2017.
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The Trump administ rat ion is expected to release its full budget today, which is expected to contain big cuts to safety net , tax cuts and USD100bn infrast ructure projects over the next decade. One major assumpt ion is that real GDP growth will increase to 3% due to supply side effects from the tax cuts, which in our view is doubt ful. We see difficult ies in passing the budget given a divided Republican party in Congress.
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In the Scandies, it is t ime for unemployment in Sweden, where we look for a small increase in unemployment.
Selected market news
The Asian equity markets are seeing small gains this morning following a terrorist at tack in Manchester that is said to have killed 19 and wound 50 people. Prime Minister Theresa May and her government have decided to suspend elect ion campaigning today. The caut ious risk sent iment follows a rather st rong session in US equity markets as some of the concerns about the polit ical upheaval in the US have faded. Furthermore, oil prices cont inued their recovery as markets are expect ing an extension of the OPEC deal on Thursday.
On Brexit , EU ministers endorsed t he EU’s negot iat ion stance towards the UK yesterday. The EU maintained the maximum demands on the UK in terms of the financial liabilit ies and legacy obligat ions for EU cit izens in t he ‘divorce’ phase of the negot iat ions. The EU’s lead Brexit negot iator Michel Barnier announced yesterday that the preferred st rategy is to start the Brexit negot iat ions during the week of 19 June. Germany warned that the reality of Brexit had yet to ‘break through’ in London.
On Greece, euro area finance ministers failed to break an impasse on debt relief for Greece yesterday in Brussels. Talks will cont inue over the next few weeks with the object ive of reaching an agreement in June. Meanwhile, the EU Commission announced yesterday that it recommends closing the Excessive Deficit Procedure for Portugal six years after its bailout , raising the prospect of a rat ing upgrade when Fitch reviews the count r y’s rat ing on 16 June.
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