Market movers today

After ‘Super Thursday’ yesterday brought another set of subdued PMI data on both sides of the Atlantic, markets are in for a more quiet day on the data front today.

EU parliament elections continue to take place today in Ireland and Czech Republic. Results will however only be announced when voting in all EU countries has closed on Sunday evening. For more on our expectations regarding the EU election outcome, see 2019 EU Parliament elections: Setting the scene for the ‘European Game of Thrones’ .

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In the UK, Theresa May is today expected to announce timetable for her resignation as U.K. Conservative Party leader and prime minister after the backlash over her Brexit plans, for more details on the situation, please see Brexit Monitor – End of May .

In the US, preliminary core capex for April is due out. Core capex has softened recently but remains at a high level and we expect investments to continue to increase over this year.

Selected market news

Yesterday, PMI releases in advanced economies cast doubt about the outlook for the global economy. Most severe was the slump in the US, where both the manufacturing and service PMIs dropped sharply. While it is not a big surprise that US manufacturing is not immune to the weakening global economic environment (global value chains), the service sector slowdown is more surprising given the strength of the US labour market. The Japanese and German PMIs also surprised on the downside while the French PMI was a rare light of hope. The weakening of the PMIs comes amid the significant uncertainty about trade relations between China and US triggered by the renewed trade dispute between the two countries over the past month.

The weak signs from the leading global economies led to a sizeable sell-off in global equity markets. The European and US equity markets finished sharply lower while US yields plummeted fuelled partly by further expectations of rate cuts by the Federal Reserve. Asian equity markets this morning, however, are paring losses after indications from US President Trump following the close on Wall Street that Huawei Technologies Co., which was put on a U.S. blacklist earlier this month, could be part of a trade pact with the country.

In the UK, Prime Minister Theresa May is expected to set a timetable for her resignation as U.K. Conservative Party leader and prime minister following the backlash over her latest Brexit proposal (see Brexit Monitor – End of May ). According to Bloomberg news, May intends to quit as Tory leader on June 10 so an election to choose her replacement can begin after President Donald Trump’s state visit to Britain. The timetable is expected to be set today. The current favourite to replace her is pro-Leave campaigner Boris Johnson, who is in favour of a cleaner exit from the EU. The GBP saw further decline yesterday.

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