Eurozone: PMI, Italy’s budget and ECB - Danske Bank
|In the euro area, we have a busy week ahead of us, explained analysts at Danske Bank. Events include the ECB meeting, EU verdict on Italy’s budget and the PMIs.
Key Quotes:
“On Thursday, we have the ECB Governing Council (GC) meeting, which we expect to be a meeting with little action. Since the last meeting, incoming data has not warranted a change in policies, not least the wording on ending its APP. Therefore, we expect, the word ‘anticipate’ to remain. Should it be changed (meaning an official end to APP), it could lead to a knee-jerk market reaction, without long-lasting implications. We do not expect discussions on the capital key update but will scrutinise any hints on this. Further, we expect a ‘vigorous’ Mario Draghi, pointing to continued solid wage dynamics but still somewhat moderate inflation assessment.”
“On Wednesday, the euro area flash PMIs for October are due. In September, manufacturing numbers continued this year’s declining trend and fell to 53.2, while services rose slightly to 54.7. We expect services PMI to extend the pickup and rise to 54.9; in contrast, we see a downside risk for manufacturing PMI, declining further to 53.0 due to the deteriorating new orders component in the latest reading. In Germany, IFO business climate for October is on the agenda on Thursday, which has defied the recent downward trend in the PMI, and it will be interesting to see whether this divergence persists in Q4.”
“Last but not least, markets still await the European Commission’s verdict on Italy’s budget draft and we expect it to issue a negative opinion and request for revision within the coming week.”
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