Manufacturing Woes Continue as Services Become Increasingly Optimistic

Another mixed day of trade in stock markets on Friday as UK consumers become increasingly less pessimistic but spend less and global manufacturing slumps further.

Sunset Market Commentary

The EMU composite PMI for April rose from 53.7 to 54.4, indicating that growth momentum in the region improved further at the start of the second quarter. However, growth has become increasingly unbalanced. The headline manufacturing PMI unexpectedly declined from 47.3 to 45.5. The services headline measures improved further from 55 to 56.6.

Canada: Retail Sales Post a Moderate Decline in February

Canada retail sales fell by 0.2% month-on-month (m/m) in February – a shallower decline than 0.6% loss reported by the Statistics Canada's advanced estimate. January's print remained unrevised at a 1.4% gain.

Japan Inflation: Higher Than Expected But Slowing

Consumer price inflation in Japan is in no hurry to slow down. In March, prices rose 3.2% y/y, compared with 3.3% in February and an expected 2.6%.

Cliff Notes: RBA Review Received as China's Economic Strength Shines Bright

Monetary policy remained centre stage across the world this week, but particularly in Australia as the RBA Review and April Board meeting minutes were released.

Weekly Focus

April Flash PMIs continued to show a picture of a two-speed economy, with euro area manufacturing index remaining on contractionary territory, but with services sector driving the composite index to a 11-month high (54.4). We think the ECB is more concerned about the latter due to the close link to wage dynamics, and continue to look for a 50bp hike in the May meeting.

Bank of Japan Preview: Risk of Tightening Too Soon Still Dominates

Calling the timing of BoJ backtracking from its YCC is a difficult task. If the BoJ starts guiding the market by indicating a steeper JGB-curve, investors will immediately dump their bond holdings, and BoJ will be forced to throw in the towel. Thus, we should not expect any clues from the BoJ and we do not read too much into Governor Ueda's message to maintain monetary stimulus.

Letting the Euro Area Data Speak for Itself

With the market counting down the days to the first week of May, next week’s data releases will probably give us the strongest indication about the forthcoming ECB decision. Inflation and GDP figures set the scene for an exciting week especially as euro/dollar is trying to remain in the vicinity of 1.10.

Week Ahead – Spotlight on BoJ's Ueda as First Meeting Looms; US and Eurozone Data Eyed Too

The Bank of Japan will hold its first policy meeting under the stewardship of Kazuo Ueda next week, although it’s looking unlikely that he will kick things off with a bang. The focus may therefore quickly shift to GDP numbers out of the United States and Eurozone where both economies are expected to have dodged a recession, while the all-important PCE inflation report will be one of the final pieces of the rate puzzle before the Fed’s May decision.

Weekly Economic & Financial Commentary: Give Thought to the Pause

The fastest pace of policy tightening since the early 1980s is winding down. Our forecast anticipates one more quarter-point rate hike at the upcoming FOMC meeting on May 3, after which we suspect the Fed will remain on hold until the fourth quarter. Had we not encountered a banking crisis, a few more rate increases might have been in the offing. However, the recent difficulties in the financial sector diminish the need for further hikes beyond May, in our view.