Manufacturing PMI Figures Beat Expectations in Europe

- European indices are in positive territory after a negative open, rebounding from their biggest two-day slide in over four years. The upward pace was led by strong earnings results, which were released ahead of the open.
European government bonds are currently trading lower in the session, giving up some of the gains made in the past few sessions as traders moved from equity into fixed income investments. Shadowing their European counterparts, gilts are trading lower in the UK after stronger than expected Manufacturing PMI for the month of February. In new supply overnight, Spain sold €1.59B in 5-Year 3.9% bonds with an average yield of 3.95%, and a bid-to-cover of 2.3; The projected sales range was €1.5B to €1.7B, while the neutral bid-to-cover was called at 2.1. France sold €2.42B in 3.75% 2017 Bonds with an average yield of 4.01% and a bid-to-cover of 2.31, overnight, as well as €1.92B in 3.75% 2021 Bonds with an average yield of 4.08% and a bid-to-cover of 3.56
- French producer prices for the month of January were above estimates by 0.1% on both a m/m and y/y basis. Despite beating estimates, the y/y figure fell to its lowest level since May of 2004. Component-wise, the largest y/y drops were observed in energy products and the auto industry.
- Manufacturing PMI figures in Europe showed that manufacturing growth slowed, while growth accelerated in Italy, France, and the Euro-Zone. The slowdown in German manufacturing was largely attributed to the VAT hike which was implemented in January.
- Manufacturing PMI for the month of February rose to 55.4 in the UK, above estimates of 53.0. Additionally, January’s figure was revised up to 53.2 from 52.8. Mortgage approvals rose to 120K in January, above estimates of 115K. Final M4 money supply figures were left un-revised from the preliminary reading at 0.9% m/m and 13.0% y/y.
- Preliminary CPI data in Italy exceeded expectations for the month of February, reaching their highest level since July 0f 2005 on a m/m basis.
- The Euro-Zone CPI estimate for the month of February was below the ECB’s 2.0% limit for the sixth consecutive month, aided by the decline in oil prices.
- The Bank of England’s Lomax said overnight that it may take another month or two for the Bank of England to gauge the impact of recent rate hike on consumer spending. Lomax said that she sees inflation to be below its target by the end of 2007, but sees a chance that CPI will breach the 3.0% level in the near-term.