Marknadsövervakning - 5th May 2020

With equity markets falling hard around the globe, it was a risk-off day and in that case sterling was soft. This morning we have final Services PMI and expect a reading of 12.0. When you consider that the UK is a service-based economy, this is a very weak number.

Eurozone Manufacturing PMI data was 33.4 with Sentix consumer confidence -41.8, much worse than the -25.9 expected and these data points weighed upon the euro. Today, we expect a German court verdict on whether ECB bond buying is legal. We expect the court to rule in the ECB’s favour. We have also just had the release of Swiss CPI, which was expected to be -0.9% on an annual basis and was released at -1.1%. Moody’s rating agency also concludes its rating review on Italy this Friday.

US factory orders fell 10.3%, worse than last month’s 0.1% decline. The market has real concerns how the economy is going to perform with the President now threatening more tariffs on China. There has also been a discussion on the possibility of giving the Chinese a haircut on their US Treasury holdings. The huge issue here is that this would destroy confidence in the market and the US would struggle to finance its debt. There are also concerns over how certain States in the US are opening up before there is a real downturn in infections.
For a risk-off day the AUD had a decent day actually squeezing higher against the US dollar, although this was probably technical trading before the Reserve Bank’s interest rate decision – who as expected kept interest rates unchanged. Australian treasurer Frydenberg commented that support provided was already enough, although they will continue to do what is necessary to support the economy.

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