Market movers today
There are a number of interesting data releases today. Furthermore, financial markets will also look out for new trade measures from the US versus China and possible counteraction by the Chinese authorities.
In the US , Markit PMIs for March are due for release. We expect the manufacturing PMI to stabilise at a relatively high level of around 55 after having fallen back a bit last month. Optimism remains high as consumer confidence rose further in February, which in our view, suggests that the services PMI could rise further from 55.9 to 56.4.
In the euro area, the PMI figures for March will be released today. For two consecutive months, we have seen manufacturing PMI decline. After peaking at 60.6 in December 2017, it declined to 58.6 in February. We expect to see a further decline to 57.6 in March from 58.6 in February given the negative order-inventory indicator and impact of the 2017 euro appreciation. The Services PMI is also expected to decline in March to 55.7 from 56.2 in February.
We expect the German Ifo expectations to have fallen further in March to 105.0 from 105.4 in February, thereby increasing the downward trend seen since November last year.
In the UK, eyes will be on the Bank of England (BOE) meeting today, although we do not expect any major policy shifts and on the EU summit, where we are looking for further details on the tentative deal that seemed to have been reached between UK and EU earlier this week.
Selected market news
As we expected, the Fed delivered a “dovish hike” by maintaining the rate hike signal at two additional hikes this year (although it was close to being revised up to one more hike, supporting the view that risk is probably skewed towards a total of four hikes this year) while raising the 2019 median dot from slightly more than two hikes to three hikes (for more details see our FOMC review: Only slightly steeper rate path due to Trumponomics ). As markets had speculated about the signal being revised up for this year, we have seen the EUR/USD moved higher and US Treasury yields moved lower after the meeting. Asian equities are more mixed as the boost from the ‘dovish’ Fed hike is mitigated by concerns about new US trade actions
This concern comes after the media yesterday reported that Trump might already announce new tariffs targeted China today (was not expected until tomorrow). The stories suggest Trump will impose tariffs on goods imported from China for a value of USD50bn but that the administration will try to limit the impact on US consumers. US Trade Representative Robert Lighthizer also threatened China with retaliation against any Chinese retaliation measures, especially on agricultural products. In the same interview, he said that the US trade deficit with the EU is a big problem. For our take on the threat of global trade war, see Symbolic protectionism with limited impact on growth and inflation but risks remain and 10 areas where China could retaliate vs US measures .
