The Eurozone struggle continues

Yesterday’s markets

1st April 2015

  • NZD ANZ Business confidence 35.8
  • GBP Current account 25.3bn
  • EUR CPI Flash estimate -0.1%
  • CAD GDP -0.1%
  • USD Consumer confidence 101.3

Yesterday’s headlines continued to be dominated by Greece and the economic issues surrounding the Eurozone. The Eurozone released two pieces of poor high tier data and speculation that Greece will turn to Russia in a last roll of the dice. Across the pond, we gained an insight into the consumer optimism of the world’s largest economy as the USA released its consumer confidence figure.

A slump in the Eurozone consumer prices eased in March, however they still remained in negative territory of -0.1% against a forecast of -0.3%. Although the figure has remained in deflationary territory for its fourth consecutive time it has offered the ECB some respite by exceeding economists’ consensus after the Central Bank increased stimulus to fend off falling prices. Eurozone unemployment data was released simultaneously with the reading posting a disappointing 11.3% adding to the recent Eurozone woes.

Greece’s relationship with the rest of Europe is looking increasingly strained and Russia is beginning to look more likely to be the country’s last hope for financial survival. A meeting between Greek PM Tsipras and Russian President Putin is scheduled for April 8 and speculation is mounting that an offer of aid from Russia could be back on the table. So far Greece have stuck with aid from its fellow Eurozone countries and the IMF. The Euro will come under large amounts of pressure leading up to this meeting and if speculation grows that a deal could be struck with Russia we could see the Euro weaken substantially.

The outlook from America is very positive with momentum towards a June rate hike more likely as consumer confidence improved. In addition, Fed officials Lacker and George stated their positive view on the US economy. Lacker stated that a strong case can be made for a June rate hike whilst George’s ‘not bothered’ by temporarily low inflation stance, says the economy is ready for less stimulus.

Today’s markets

31st March 2015

  • China manufacturing PMI 50.1
  • HSBC Final manufacturing 49.6
  • GBP Manufacturing PMI
  • USD ADP Non farm employment change
  • USD ISM Manufacturing PMI

Chinese manufacturing surprised by posting a positive 0.2 gain in the index resulting in an overall figure of 50.1 which means that the sector has returned back to expansionary territory. The HSBC’s flash manufacturing PMI was also revised a little higher to 49.6 in March although it remains below its February reading. Despite the positive numbers the sector is still under strain.

Today’s focus will be on UK manufacturing and the US ADP employment report. Manufacturing from the UK is forecast to remain in expansion at 54.5, whilst ADP is due to continue its bullish trend of above 200k expected at 226K as we gain our first insight into Friday’s all important non-farm pay roll number. With the majority of the market closed for Good Friday there may be additional emphasis put on the ADP employment report today.