WEEK IN REVIEW: Activity indicators stabilise
In Europe, Markit’s purchasing managers’ composite index, a survey of business activity in the manufacturing and services sectors, fell to 53.9 in May, after 54 in April. Though it remained higher than the zero-growth threshold of 50, it signals that GDP growth is likely to remain moderate in Q2 after a disappointing stabilisation at 0.2%qoq in Q1.
Several EU countries have held EU Parliament elections ahead of the final day 25 May, including the UK, Ireland and the Netherlands, though the results will only be known on the 25th. In the UK, the UK Independence Party is expected to win the elections with close to 30% of the votes according to the latest polls, signalling strong dissatisfaction with the EU (the party did well at local elections according to the results that are being released today)
S&P upgraded Spain’s Government debt to BBB from BBB-, on the back of stronger growth prospects. This should support appetite for Euro area’s periphery’s debt.
In the US, the minutes of the Fed meeting show that the debate has started among OMC members about how to implement the exit strategy from ultra-low rates and an expanded balance sheet. Tapering is still on track, with the Fed agreeing to reduce its monthly asset purchases to $45bn.
WEEK AHEAD: Confidence indicators to point to moderate growth in Europe
25 May: EU Parliamentary elections will take place in many countries, inclusing Portugal, where domestic themes have dominated the debate and overthrown European issues
27 May: Consumer confidence will be out in several European countries ahead of the European Commission indicator and in the US
28 May: May European Commission Sentiment Indicator: Markets expect a stabilisation in the euro area at 102, as growth is seen stalling at a moderate pace