German production rose at a record pace in March, according to IHS Markit, resulting in growth across the Eurozone. The PMI jumped to 66.6 from 60.7 in February, well above the expectations of 60.8. The data point to record growth in manufacturing activity amid record growth in production and sales in Asia (especially in China).
Many manufacturers pointed to difficulties in demand, reflected in an unprecedented rise in backorders. Employment also returned to growth and surpassed indicators in more than 2 years. In addition, price pressures intensified as commodity prices rose the most in 121 months. The cost of imported inputs has risen sharply in France and Germany, which has led to a decline in profitability, and this, in its turn, is forcing companies to raise prices for finished products.
“Business sources remain very optimistic about the outlook for the coming year, and many are pinning their hopes on progress in vaccine distribution,” IHS Markit economist Phil Smith made a statement on the latest trends in Germany. “However, with the new quarantine measures coming into effect in April, the outlook for the near future looks less encouraging.”
Against this backdrop, investors ignored the positive data, focusing on the problems that a new quarantine in Germany and France could bring. The DAX lost 0.35% on Wednesday, while the S&P 500 renewed its lows on March 23. The Treasury yield fell to 1.61%.
There are signs of optimism in the commodity markets. After the PMI report and the announcement of the blocking of the Suez Canal, oil prices rose sharply. The stranded container ship Ever Given, which is longer than the Eiffel Tower, ran aground in the southern part of the canal in Egypt, which is likely to negatively affect oil supplies. WTI rose sharply by just over 5% and returned above $60 p/b.
Main market quotes:
- S&P 500 (F) 3,89162 +10.87 (+0.28%)
- Dow Jones 32,420.06 -3.09 (-0.01%)
- DAX 14,610.39 -51.63 (-0.35%)
- FTSE 100 6,712.89 +13.70 (+0.20%)
- USD Index 92.552 +0.022 (+0.02%)
US GDP (q/q) (4q) at 14:30 (GMT+2).