Market movers today
German CPI for February will be in focus this morning as CPI for German länder rolls over the screens before the countrywide CPI is released at 14.00CET. Both France and Spain saw upside surprises in CPI inflation yesterday.
In the US it is time for ISM manufacturing for February, which we expect to tick higher following stronger-than-expected US manufacturing PMI released 1½ week ago.
It is PMI day in many European countries, not least the UK and Norway and Sweden. We could see a small pick-up in the numbers as witnessed in many countries in early 2023. It follows a decent decline in energy prices and a lift in Chinese activity after the re-opening of the economy.
The 60 second overview
China: PMI indices rose across the board in China in February and rose by more than expected by consensus. Reopening of the economy has led to a rise in economic activity. The manufacturing gauge increase to 52.6 from 50.1 and thus well into expansionary territory. The non-manufacturing index rose to 56.3 from 54.4 and finally the composite measure was 56.4 – a big increase from 52.9. The Caixin manufacturing PMI confirmed the picture above. It rise to 51.6 from 49.2.
US: Consumer confidence dropped in the US in February after consumers turned sour about their expectations for the future. They remain upbeat about their view on the current situation though.
Equities: Equities lower yesterday in a remarkable cyclical outperformance. This is very interesting as it illustrates quite well the battle between a soft-landing and overheating. On the one side the challenge coming from too high inflation (yesterday France and Spain), lifting yields, hurting the equity risk premia. On the other side the improving macro-outlook lifting the chance of better earnings outlook benefitting the cyclicals the sector the most. Despite the drop in almost all major indices yesterday, materials and financials (driven by banks) outperformed, while utilities were underperforming. We expect the battle between overheating and soft-landing to continue for a while as the job market is still strong, growth will improve from a very low level while this is countered by massive monetary tightening.
In US yesterday, Dow -0.7%, S&P 500 -0.3%, Nasdaq -0.1% and Russell 2000 +0.04%.
Asian markets are higher this morning led by a rally in Chinese H-shares. Optimism was boosted overnight from strong PMI releases, not just in China. The strong macro data from Asia have also resulted in a turnaround in European and US futures, meaning they are now higher after being lower very early morning.
FI: It was again a volatile day in the global bond markets, where the sell-off continued on the back of stronger than expected inflation data from France and Spain. Today, we will get inflation data out of Germany before the aggregate data is released from the Eurozone on Thursday. If inflation data continue to surprise on the upside the repricing of the ECB should continue and thus put more pressure on bond markets.
FX: Yesterday, EUR/USD moved back below 1.06, as USD increased in late trading after EUR initially broadly strengthened on the back of stronger-than-expected inflation prints from Spain and France, which could indicate a relatively strong Euro Area inflation print in the pipeline tomorrow. For the whole of February, USD has appreciated against all G10 peers except SEK. EUR/GBP is hovering around the 0.88 mark, and both SEK and NOK weakened against the EUR trading at 11.07 and 10.98, respectively.
Norway. We reckon the Norwegian PMI will hold around 50 in February, with continued weak growth in European manufacturing sector probably counteracting optimism in the oil supply sector. Statistics Norway’s Q4 confidence survey suggests some downside risk to our forecast.
Sweden. While Swedish manufacturing PMI has dropped a lot alongside global dittos and was down at 46.8 in January, it has moved sideways in recent months. Also of great interest is the subcomponents, where on the positive side price plans and delivery times have moved lower and on the negative side employment has moved lower as well and seems to be on the verge of dropping below the 50 mark.