Stronger Services PMI Numbers Buoy European Stocks
European stock markets are mostly moving higher, with only the DAX underperforming and down on the day. The German index reached an all-time high this week and at these levels investors are turning cautious, especially ahead of the Trump-Xi meeting.
Other Eurozone markets moved higher though with Spain and Italy outperforming after Liikanen repeated that the Eurozone economy still needs strong monetary support and downward revisions to services PMI readings, which will reduce some of the pressure on Draghi to turn to a less dovish forward guidance.
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The FTSE 100 is up despite a rise in Sterling. This followed a largely positive session in Asia overnight China and Twain led Asian markets higher as investors bet on potential gains from the development of a so-called economic zone in Hebei province helped to lift China, while benchmarks in Japan and Australia fluctuated as currency advances weighted on exporters.
UK March Service PMI Beat Expectations
UK March services PMI beat expectations with a 55.0 headline reading, up from 53.3 in February and well up on the median forecast for a dip to 53.2. New orders rose to 56.6 from 54.7, though the rate of staff hiring slowed and prices charged accelerated to the highest rate since 2008. The composite PMI survey, which includes the disappointing construction and manufacturing surveys, worked out at a 54.9 headline, up from 53.8 and beating the median forecast for an unchanged reading. Markit, the compiler of the surveys, has estimated that the data is consistent with GDP growth of 0.4% quarter over quarter in Q1. With the big services sector coming to the rescue, it’s clear that the UK is continuing to perform robust despite Brexit.
Eurozone services PMI revised down to 56.0 from 56.5 reported initially, as the Italian reading fell back to 52.9 from 54.3 and the French reading was revised down to 57.5 from 58.5 reported previously. The German number was confirmed at 55.6 and despite the downward revision to the final March reading, it still was up from 55.5 in February, so improvement in activity continues.
The Easter effect already distorted the March price data and will also have some impact on manufacturing, which will be stronger in March this year as last year, but then fall back again in April as the holiday effect kicks in. Overall the Eurozone composite reading still improved to 56.4 in March from 56.0 in the previous month, so a confirmation of the ongoing recovery in the Eurozone.