German IFO and US new home sales will be the main data to watch.
We look for a small rise in the German IFO, pointing to continued robust growth inGermany. The short-term indicators have been a bit mixed in Germany lately. TheZEW index, factory orders and OECD leading indicator have softened a bit, whereasyesterday’s PMI showed a rise in the composite new orders index. It is likely thatmanufacturing is taking a small breather as export conditions worsened earlier thisyear on the back of the slowdown in the US and China. The strong euro has alsocaused some headwind for exporters. However, the domestic economy in Germany isstrengthening, which compensates for the export headwinds.
US new home sales are expected to rise 10% m/m in April but this follows a big dropin March. Overall the housing slowdown seems to be stabilising as witnessed byhigher existing home sales as well as stronger building permits recently. The negativeimpulse from rising mortgage rates last year may now be fading leading to a gradualrecovery of housing again after 2-3 of quarters of weakness.
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Danske Bank