In the last full week of March, preliminary PMI reports for March will be published, which is the worst global month of the coronavirus outbreak. Its devastating effects on the economy may be visible in PMIs published from east to west. The decisions of the Bank of New Zealand and the Bank of England will be also published, this time after the regular meetings.
The week will start with the publication of PMIs indicators on March 23. Subsequently, from 1:30 to 14:45 there will be reports from Japan, France, Germany, the eurozone, Great Britain and the United States. According to the available market consensus, the services PMI for Euroland is expected to fall in March to 38.1 points from 52.6 points a month earlier. In turn, the manufacturing indicator is to go back to 39 points from 49.2 points. To realize how low these levels could be, it is worth mentioning that during the crisis in the eurozone, the services PMI fell to around 46 points. However, only once, during the great financial crisis, went back below 40 points.
Why is PMI so important? They can often serve as indicators ahead of official data, e.g. on GDP. In other words, if there is such a strong decline in PMI, the European economy is likely to fall into recession. However, the consensus for other countries is also not at much higher levels, only barely above 40 points.
Meanwhile, in the US most of the data will include data for February, so their relevance to what is happening may be very low. The investors may focus on progress in the US plan on fiscal stimulus and any new announcements of support for employees and businesses that could alleviate the negative effects of the epidemic.
Central bank representatives from New Zealand and the United Kingdom will meet at regular meetings. In London, it has already been decided twice, at special meetings, to cut interest rates to 0.1 percent. and increase QE by 200 billion pounds. Therefore, the next meeting may be devoted to communication about possible further activities.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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