Market movers today
In the euro area, focus will be on the PMI figures and whether they can continue upwards, in contrast to the weakness in manufacturing PMIs observed in the US and China in recent months. We expect a minor slowdown in the euro area PMIs, but note that the figures should remain at a high level and still show continued expansion.
The German ifo business confidence will also attract attention today. Ifo estimates fell slightly in April to 105.2 from 105.7 in March. We may see a further small decline in German business expectations to 104.9 due to a softening of the business cycle indicators in the US and China, although there could be tailwind from the outcome of the French election.
In the UK, focus will be on the nature and impact of the terrorist attack in Manchester. The UK government has announced that election campaigning is suspended today.
In the US, the Markit PMI (composite) is expected to show a modest increase as the current level only reflects around 1% GDP growth, which is below our expectation of a current underlying growth rate of around 2%. This would justify a modest rise in Markit PMI. US new home sales are estimated to show a small decline in April after some strong months in early 2017.
The Trump administration is expected to release its full budget today, which is expected to contain big cuts to safety net, tax cuts and USD100bn infrastructure projects over the next decade. One major assumption is that real GDP growth will increase to 3% due to supply side effects from the tax cuts, which in our view is doubtful. We see difficulties in passing the budget given a divided Republican party in Congress.
In the Scandies, it is time for unemployment in Sweden, where we look for a small increase in unemployment.
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