Danske Research Team
Danske Bank A/S
Market Movers
Today is the big manufacturing PMI day in Europe. On the back of the fall in the euro area PMI figures last week, the direction of change for Spain and Italy is already set and we expect to see a solid decline for both countries. We also get euro area unemployment figures where we expect the downward tendency to continue.
This afternoon ECB's Lautenschlaeger speaks in New York. ECB speeches will continue to get a lot of attention going into the 10 March ECB meeting as markets look for hints as to how the central bank can ease policy further amid collapsing inflation expectations and realised inflation prints (see Euro area core inflation fell inFebruary, 29 February).
We expect the UK manufacturing PMI to show a small decline, suggesting that the economy might slow down somewhat in the coming quarters. We do, however, expect levels to remain relatively high and well above 50, thus pointing to positive growth.
In the US ISM manufacturing is due and we estimate the index increased to 48.6 (from 48.2). As wider credit spreads and tighter financial conditions will be a negative for the manufacturing sector (which is still struggling with a strong USD, weak manufacturing globally and low oil investments), we expect ISM manufacturing to be suppressed over coming months. Today we will also get the final manufacturing PMI print for February. Finally, today is ‘Super Tuesday’ in the primary elections.
In the Scandis we will get manufacturing PMI releases in Norway and Sweden. In Denmark the monthly FX reserves figure from Nationalbanken will catch attention. See Scandi Markets.
Selected Market News
Yesterday China added to stimulus after the Asian close by cutting the reserve requirement ratio by 50bp, thereby increasing expectations that more easing is to come (see China adds to stimulus, 29 February). This morning, these expectations got more fuel as Chinese manufacturing PMI figures disappointed. We had expected a slight increase in both the official and the private Caixin index but instead both indices dropped by 0.4 index points. While the manufacturing releases may have been distorted by seasonal factors (i.e. the Lunar New Year holiday in February), the services PMI release (less vulnerable to the holiday) also disappointed reaching the lowest level since 2009.
As expected the Reserve Bank of Australia left the cash rate target unchanged at 2.00% at this morning’s March meeting. The monetary policy statement was left close to unchanged and re-iterated the central bank’s explicit easing bias.
This morning the Fed’s Dudley (voter, dovish) said that he so far has only marked down his forecast for US growth ‘very modestly’ emphasising transitory drags on growth from Q4 15. Dudley did, however, express concern as to the drop in inflation expectations and the rise to ‘downside risks’.
In Japan capital investment-, company profits- and household spending figures all surprised to the downside countering the optimism from a drop in unemployment.
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