Disappointing Euro PMI’s send yield spreads wider
I don’t expect the ECB to consider further easing moves on the back of today’s PMI data, as the disappointing Euro PMI’s are more about a temporary downturn in global manufacturing following the sharp rise in oil prices.
Please read more in the slide attached.
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With ECB rather relaxed about EUR, the US payrolls so-so, the only hope for USD now is if bad news from China escalate...
Today’s stronger-than-expected payrolls data are a very positive sign because the details even suggest that the unusually cold weather was an important drag on February’s jobs growth. As a result, the report supports our view that US economic activity indicators more generally will snap back once the weather normalises.
Today marked the first domestic corporate bond default in China’s history. This default could be a game changer for the entire corporate bond market in China. More corporate defaults can be expected which will help address moral hazard. Risk of spill-over is so far limited because of the small size of the corporate bond market.
Scandinavian key figures are the main events next week. Price data from both Sweden and Norway could have a large impact on their respective central banks. Find our expectations here.
•SEK: Rate cut effect lingers, value in BEI •DKK: Temporary setback •EUR: Higher core inflation
Conceptually, it looks attractive to look at Swedish BEI wideners as a complement to SEK vs EUR spread compression trades
• We expect CPI inflation to be up by 0.4% m/m in February. • The rise can partly be explained by higher clothing and footwear prices. • If we are right, the difference versus the Riksbank’s forecast will narrow.
• Inflation will stabilize • Back in line with Norges Bank’s forecast
Instant view: The Statistics Sweden’s investments survey was a bit disappointing as for the manufacturing industry. Companies plan to increase investments by a modest 2% for 2014. Moreover, companies are almost always too optimistic in the February survey. On average, companies have overestimated investments by 8% the past 10 years, suggesting that investments will fall in the manufacturing industry in 2014.
Instant view: The monthly indicator of household consumption in January rose by 1.0% over the month and by 0.9% over the year.* This was higher than our forecast and also stronger than the previously released figures for retail sales.
Piotr Bujak @pbujak Mar 9
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