Fri, Mar 24, 2023 @ 22:05 GMT
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All Eyes Will on Flash PMIs from Europe and US

Market movers today

Today, all eyes will be on flash PMIs from Europe and the US. In the euro area, we look for potentially more evidence of rebounding activity amid easing inflation pressures. In the US, NY Fed’s Empire and Philly Fed Manufacturing indices have sent mixed signals thus far for February but we still expect the PMIs to edge higher.

The German ZEW index will also be released today, and consensus expects a further improvement in both the forward-looking assessment as well as on the respondents’ assessment on the current situation.

Overnight, the Reserve Bank of New Zealand will announce their rate decision. A 50bp hike is a clear base case.

The 60 second overview

Market sentiment: Stock market futures are in red and the euro is slightly down against the dollar this morning as markets tune in for PMI signals on economic growth. While global financial conditions eased substantially from November until January this year, February has marked a U-turn. The conflict between stronger growth and persistent price pressures still remains, and as the global economy has fared better than expected, also underlying price pressures persist. Higher short-term inflation expectations are reflected in steeper yield curve inversions and expectations of higher central bank rates for longer.

Chinese peace proposal: Several media outlets have reported that China is planning to present its own proposal for peace in Ukraine this week, as the first anniversary for Russia’s invasion looms. Details have not been revealed but China has said their proposal would uphold the principles of territorial integrity while also respecting “Russia’s legitimate security interests”. For now, the West has shown a sceptical response to China’s proposal as they are seen as an ally to Russia, and hence, hardly impartial. Western officials have also highlighted that the only way to a lasting peace is through Russia withdrawing its troops from Ukraine.

As the war drags on, rifts in the global community will most likely continue to grow. Many countries in the global south have opted to stay neutral, as for historical reasons they have little sympathy towards a US/European alliance. Many low income or lower middle income economies also see that the West could use its resources more wisely, not on warfare. Within Europe, cracks may also emerge as Eastern European countries continue to have a very hawkish stance on Russia while large Western European countries could be more attracted to peace proposals. Sentiment in the US, which is by far the greatest contributor to Ukraine’s military, may also change as the 2024 election approaches.

FI: With US closed and little news on the wires, European rates traded mostly sideways. Only late in the afternoon, markets recorded a small sell-off which thereby left rates 1bp higher for most countries in core and semi-core and marginally more in the periphery. Most curves parallel shifted higher.

FX: Yesterday’s session was all about the strengthening of the SEK and the spill-over effects to neighbouring NOK. EUR/SEK is now back below 11.10 while EUR/NOK has settled in the low 10.90s. EUR/USD did nothing on a day where US markets were out with EUR/USD still trading south of 1.07. EUR/GBP is back below 0.89 while the rally in USD/JPY has paused.

Credit: It was a busy day in corporate primary market yesterday as Swiss pharmaceutical company Roche, the UK-Dutch consumer goods group Unilever and French luxury firm Kering all printed EUR dual-tranche deals, while UK supermarket chain Tesco brought a GBP/EUR dual-tranche to the market. The EUR FIG segment saw only covered bonds placed while no unsecured issuance took place. Meanwhile, CDS indices were broadly unchanged with iTraxx Main holding steady at 78bp and Xover widening 4bp to 409bp in yesterday’s trading.

Nordic macro

Both Martin Flodén and Henry Ohlsson from the Riksbank board will speak today at two different events. As minutes have been released, they are now free to comment on monetary policy and there may well be some comments on everything ranging from the weak Krona to yesterday’s inflation surprise, which would not have been to the board’s liking.

Danske Bank
Danske Bank
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