Macro-News round-up

🌍 ECB officials are sticking to their intentions to drop interest rates several times this year, despite rising US inflation delaying the Federal Reserve’s shift to looser monetary policy and Middle East tensions keeping oil prices high.

🗣️ ECB President Christine Lagarde has made clear indications that the euro zone’s central bank is still expected to start lowering its deposit rate from a record-high 4% in June.

🤔 Almost all of Lagarde’s counterparts from the 20 national central banks that make up the currency union have stated that they anticipate additional rate cuts when the euro zone’s inflation gradually drops to the ECB’s target of 2% by the end of the following year. According to French central bank governor Francois Villeroy de Galhau, the most recent events in the Middle East and the United States were generally viewed as cause for increased caution but did not significantly alter the situation in the euro zone.

📈 The preliminary composite euro zone Purchasing Managers’ Index (PMI) for HCOB, compiled by S&P Global, increased to 51.4 this month from 50.3 in March, significantly higher than the 50.7 expected.

🤔 However, the numbers show two fundamental issues: first, the strength is centred on the service sector, the source of the resilient inflation Europe is suffering from; second, the manufacturing sector continues to be weaker than the service sector in a traditionally industrial economy, such as the German economy.

📊 The flash services PMI jumped to 52.9 from 51.5 last month, above all predictions, while the manufacturing PMI fell from 46.1 to 45.6, confusing predictions for an increase to 46.6.

📈 Monday was a little better day for US markets, with the NASDAQ gaining 1.11% and the S&P 500 growing by 0.87%, but this was insufficient to make up for the losses from last Friday, and equity futures don’t appear optimistic.

💰 Bonds remain at very high levels, with the US 2-year bond at a yield of almost 5%, indicating geopolitical risks may be attracting low-risk safe haven investment and a rate cut in the US is still off the agenda.

💸 The euro is getting weaker and weaker against the dollar, trading close to the 1.06 – 1.0650 area, as we have been talking about for a long time.

🛢️ Crude oil continues to cool, possibly motivated by comments of a change in OPEC policy from July, where the restriction of its production could come to an end, which would mean an increase in the supply of crude oil and a fall in its price on world markets, provided the war in the Middle East does not escalate.