On Friday, November 23rd we have the release of Markit PMI for the Eurozone, which by itself can move the market. However, given the lackluster performance of equities in Europe recently, with the Stoxx 600 hitting a two-year low on Wednesday, as well as US investors away from their desks for Thanksgiving, there certainly is a hunger for better economic data out of Europe. Let’s go over what we could expect from this event.
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Markit Manufacturing PMI data
PMI stands for Purchasing Managers’ Index and is compiled by a firm called IHS Markit. It’s a survey of corporate executives about their appreciation of the business conditions in their sector, and the release on Friday covers the Manufacturing and Service sectors.
It’s called “purchasing” because the survey is intended for company executives, analysts and purchasing managers so they can figure out how much inventory to carry, whether to invest, etc. As such, it is a good proxy of overall economic health.
The survey is compiled based on three criteria: improvement, no change, and deterioration, and put on on a scale of 0-100. The midpoint of 50 represents the difference between growth over prior survey (that is, the preceding month) if it’s above; or below 50 showing contraction. This survey is preliminary (the “flash” part of the name) and subject to revisions; but being fresh data, had a greater impact on the market.
In the case of Europe, the data comes out staggered: First, we get French PMI at 09:15 CET (03:13 EST), then fifteen minutes later we get German PMI, and then a half hour after that, we get the data for the entire Eurozone.
Because France and Germany represent the bulk of the euro economy, the market often will react more to the data from those countries, and be already on course by the time the consolidated data comes out.
What’s been going on
Last month’s series of data releases seemed to start out OK but then took a dive.
First French data came in with disappointing manufacturing PMI, but better than expected services PMI; later Germany came in disappointing across the board, and finally the Eurozone confirmed that the outlook wasn’t as good as was hoped, and we had the market move to the downside (5-minute chart):
While all data points remained above 50 indicating continued expectation of growth, they carried on showing a lessening expectation of growth, a trend that has been maintained since January.
What are we looking for
France Manufacturing PMI: The first bit of data, and the headline. Expectations are to continue in growth territory but to come in at 51.0, which is down from the 51.2 from last month
Germany Manufacturing PMI: The biggest component to the Eurozone. Also expected to remain in growth territory, but in line with prior month at 52.2.
Eurozone Manufacturing PMI: Expectations are for this data to also come in line with last month at 52.0.
Remember that just prior to this, we are expecting the release of German quarterly GDP data, which could already have riled markets a bit.