Financial Markets Review – 24th March 2016

Monday 21 March

• In Europe, Germanys February PPI numbers came in at -0.5% mom (vs. -0.1% expected; -0.7% prior) while wage growth data out of France (+0.1% QoQ) came in line with expectations.
• Regarding macroeconomic data in the US, the University of Michigan Consumer Sentiment Index for March came in below expectations (90.0 vs. 92.2 expected; 91.7 prior) while also falling to a five-month low. The current economic conditions index fell to 105.6 (vs. 106.8 expected; 106.8 prior) while the expectations index fell to 80.0 (vs. 82.5 expected; 81.9 prior). The weak data was mainly due to concerns about US economic growth prospects as well as expectations that oil prices would steadily increase in the year ahead.
• US inflation expectations over the short and long term rose to 2.7% (vs. 2.5% previous). Existing home sales declined faster than forecast at 5.08M (vs. 5.31M expected; 5.47M prior), which was potentially driven by a shortage of supply rather than demand. The Chicago Fed National Activity index (CFNAI) was also disappointing in February (-0.29 vs. 0.25 expected).

Tuesday 22 March

• During their public speeches, Atlanta Federal Reserve President Lockhart and FRB Richmond President Lacker provided an optimistic view on the US economy and maintained their confidence in US inflation reaching its target of 2% over the medium term, due to continued job market improvement. They also believe that there is sufficient economic momentum to justify a rate hike at one of the coming FOMC meetings.
• In Europe, the Eurozone composite PMI for March clock in above expectations at 53.7 (vs. 53.0 expected) while the manufacturing PMI was in line with expectations at 51.4. France and Germany both saw positive surprises in their services PMI prints of 51.2 (vs. 49.5 expected) and 55.5 (vs. 55.0 expected) respectively, but disappointing manufacturing PMIs as Germanys number came in at 50.4 (below 50.8 expected) while France fell into contractionary territory (49.6 vs. 50.2 expected; 50.2 prior).
• German business confidence also improved for the first time in four months as IFO business climate survey numbers came in above expectation, (106.7 vs. 106 expected; 105.7 prior).
• UK February CPI (+0.3% YoY vs. +0.4% expected) was below expectations but still headed back to inflationary territory on a monthly basis (+0.2% mom vs. -0.8% prior). PPI data was slightly better than expected (-1.1% YoY vs. -1.2% expected) but within deflationary territory.
• In US, manufacturing PMI reading disappointed at 51.4 (vs. 51.9 expected), but also rose slightly from February’s print of 51.3. FHFA House Price index rose in line with expectations at +0.5% mom.

Wednesday 23 March

• US new home sales in February came in marginally above expectations at 512k (vs. 510 expected; 494k previous).
• Fed official Bullard spoke yesterday and suggested that a rate hike could be possible as early as April, which is delivering mixed signals as these comments conflict with the dovish nature of the FOMC statement last week.

Thursday 24 March

• In UK, Retail sales came in better than expected at a marginal decline of –0.4%, beating expectation of -0.7%.
• US orders for durable goods fell in February for the third time in four month (by -2.8%), reflecting a broad-based slowdown in US capital market.
• China’s central bank release data on its capital outflows for the month of February, which shows that there are further declines of capital outflows ($28.6bn) compares to $107.9bn in Dec 2015 and $99.5bn in Jan 2016.