European PMI surveys surprise to the upside

Yesterday was dominated by PMI survey results, starting with India which continued to indicate a robust private sector expansion in the country according to the flash estimate, with the final reading due to be published next week. The manufacturing survey was at 59.1 in April, in line with the previous month, while services rose to 61.7, up from 61.2 the previous month, leading to the composite survey rising from 61.8 in March to 62.2.

There was an upside surprise in PMI data for Germany, with the composite rising from 47.7 in March to 50.5, beating the predicted 48.4. Services rose sharply to 53.3, but manufacturing continued to exert a drag on activity as it was at 42.2, marginally higher than March’s 41.9 and missing the predicted 42.7. We will be watching the IFO survey release from Germany later today to see if it supports the sentiment given by the often-volatile services PMI. In France, the composite reading remained contractionary but only just, at 49.9, up from 48.3 in March. Again, this was driven by services which turned positive for the first time since last May at 50.5, but manufacturing slipped to 44.9, down from 46.2 previously. These upside surprise drove a similar outcome in the Eurozone aggregate PMI, with the headline composite at 51.4, with a 52.9 reading from services offsetting 45.6 on the manufacturing index. The single currency bloc is predicted to return to growth at 0.2% q/q this quarter, following two consecutive 0.1% contractions in H2 last year.

The UK’s PMI survey for April also beat expectations, as the composite measure rose to 54.0, from 52.8 in March. This was the highest reading for the index since May last year, but as with the Eurozone economies it was the services sector that continued to drive the improvement. Services PMI was at 54.9, beating the predicted 53.0, but manufacturing fell back into contractionary territory at 48.7 in April, having turned briefly positive in March for the first time since July 2022. Of interest to the Bank of England will be the composite output prices measure falling to a multi-month low, although input prices rose sharply on the back of higher wages, suggesting that inflation pressures remain salient.

Today’s Economic Data and Events

12:00 Germany IFO Business Climate, April. Forecast: 88.8

12:00 Germany IFO expectations, April. Forecast: 88.9

16:30 US durable goods orders, March. Forecast: 2.5%

Fixed Income

• Yields on USTs fell back slightly yesterday, with the 5% yield on the 2yr proving elusive as it retreated 4bps to 4.9310%. The 10yr yield was almost unchanged at 4.6004%.
• APICORP has mandated banks for a USD 5yr benchmark bond. APICORP is rated ‘AA’ by Fitch.
• Ziraat Bank has mandated banks for a USD benchmark issuance at 5.25%.
• Egypt’s central bank has said that it will henceforward carry out its main operation ‘through a fixed-rate operation with full allotment at the mid-corridor rate.’

FX

• The dollar index closed down 0.4% against its basket of peers yesterday, its second consecutive day of losses, with positive surprises in PMI surveys bolstering GBP, which added 0.8% to 1.2449, and EUR which added 0.4% to 1.0701.
• JPY was almost flat at 154.83, while the commodity currencies continued to gain against the greenback, with AUD adding 0.6% to 0.6487.

Equities

• Equity markets remained in a bullish mood yesterday, with Asian indices mostly closing higher save the Shanghai Composite which dropped 0.7%. The Hang Seng closed up 1.4%, while the Nikkei added 0.3%.
• The positivity continued in Europe, where the FTSE 100 closed up 0.3% to a record high for the index, while the CAC added 0.8% and the DAX 1.6%.
• In the US, tech earnings reports were the driver of gains, with the NASDAQ closing up 1.6%, followed by the S&P 500 up 1.2%, and the Dow Jones which added 0.7%.
• Locally, the DFM closed up 0.1% while the ADX ended the day 0.1% lower.

Commodities

• Oil prices saw strong gains yesterday as the API reported a 3.2mn bbl fall in US crude inventories last week and the US moved forwards with new sanctions against Iran.
• Brent futures closed up 1.6% at USD 88.4/b, while WTI added 0.6% to USD 83.4/b.