Monday is the first trading session of the new quarter and comes with a series of data points that could change the general mood of the market. March trading was dominated by the fallout of the collapse of four banks, which sent investors running for safe havens. Over the last week, optimism has been coming back, but there are still worries.
One of the issues is whether the chaos in the banking sector has filtered through to the real economy. That could be first seen in the PMI figures that will be released through the session on Monday. The survey was conducted during the time when there were the most worries about the banking system. So, if the results are better than expected, it could help boost investor confidence. If they are worse than expected, investors could look past them assuming they were unusually negative because of the now dissipating banking situation.
The key data points
China already reported its official PMI measure conducted by the National Bureau of Statistics (NBS), showing the composite result jumping to multi-year highs. This was helped by a surge in the non-manufacturing component to 57.0, above the 55.1 projected (which was lower than the 56.4 prior). The non-manufacturing result was the highest since 2011 and was boosted by improved consumer demand. Manufacturing PMI also beat expectations at 51.9 compared to 51.5 forecast but it was lower than the 52.6 in February. The boost in optimism provided by the data carried over into the European session, fueling risk appetite in the final day of the quarter.
Focus turns to Europe on Monday, with France expected to report first and set the tone for the shared economy. Expectations are for a repeat of the Preliminary March Manufacturing PMI number, which saw a slight improvement to 47.7 compared to 47.4 prior.
Other countries in the opposite direction
But Germany was seen as more negative, as high energy costs impacted industrial order lead times. This is a quirk of how PMIs are tabulated, in that if an order is placed but won’t be fulfilled until later, it counts as a negative. In other words, German firms are still placing orders for products and services, but agreeing on delivery later in the year. This is likely due to the expectation that energy costs will come down in the coming months and reduce costs.
German Final March Manufacturing PMI is expected to repeat the Preliminary number of 44.4, which is down from the 46.3 in February. Following that, the Euro Zone is expected to report a decline in manufacturing PMIs to 47.1 v 48.5 in the prior month.
The anglosphere is doing a little better
UK Final March Manufacturing PMI is expected to remain above its continental counterparts, but continue to trend lower even as the country managed to technically avoid a recession. It’s forecast to be the same as the preliminary number at 48.0, down from 49.3 in February.
US ISM Manufacturing is expected to buck the trend of other industrial data which has largely come in below expectations over the last few weeks. It’s expected to remain in contraction, but rise to 49.0 from 47.7 prior.
