PMIs take center stage, lifting the veil on recent trade uncertainty

In focus today

Today, focus turns to the final euro area PMI data for April. Revised manufacturing data has already revealed manufacturing rising to 49.0 from the preliminary print of 48.7. The index thus stands at the highest level since August 2022, which is much better than feared given the trade uncertainty that mainly affects sales of goods. Overshadowing this however, preliminary services PMI dipped into contraction territory for the first time since November, as it declined to 49.7 from 51.0, so it will be interesting to see whether this is also revised up in the final print.

In Sweden, at 8.30 CET we will receive the services and composite PMIs for April. As for the manufacturing sector, both the PMI and the NIER survey for April posted gains, while the services sector indicator in the NIER survey was more or less unchanged in April (98.0 vs 97.7). Thus, the overall impression from these surveys is that a marked downturn in today's PMI figures seems unlikely.

Economic and market news

What happened yesterday

In the euro area, the Sentix investor confidence index clawed back above expectations to -8.1 from -19.5 in April (cons: -12.5). While the index remained in negative territory, this also underlines that investors view the recent movements in the trade war as less aggressive compared to a month ago.

In the US, the ISM report on US non-manufacturing sector revealed a PMI of 51.6 in April up from 50.8 in March (cons: 50.6). The non-manufacturing business activity index declined to 53.7 from 55.9, but continued to remain well above 50, while new orders, prices and employment all moved higher. Overall, a hawkish data print that moved EUR/USD somewhat lower.

In Switzerland, inflation surprised significantly to the downside with headline inflation at 0.0% y/y (prior: 0.3%, cons: 0.2%) in April and core at 0.6% y/y (prior: 0.9%, cons: 0.8%). This comes while the SNB has an expectation 0.3% for Q2. EUR/CHF jumped higher on release and markets are increasingly pricing a cut of 50bp for the upcoming meeting in June, currently pricing in 30bp. We continue to expect a cut to 0% in June with the SNB commencing on FX intervention to weaken the CHF before negative territory is reached. After today's release however, the risk of a move to negative rates has definitely increased.

Equities: Yesterday, we saw a decline in equity markets, breaking the recent upward streak that has persisted over the past couple of weeks. Notably, this movement occurred without any significant changes in the news flow. It is worth highlighting that US equities underperformed relative European equities, where cyclical stocks continued to lead. In contrast, defensives outperformed in the US. In the US yesterday, Dow -0.2%, S&P 500 -0.6%, Nasdaq -0.7%, Russell 2000 -0.8%. Turning to Asia this morning, markets are generally in positive territory, while futures in both Europe and especially the US are pointing lower.

FI&FX: Stronger-than-expected US economic data sent bond yields higher while the USD is stabilising versus EUR and JPY. The oil price continued to decline as OPEC keeps raising output. In Asia there has been a weakening of the USD relative to some of local currencies such as the Taiwan dollar.