German Bund yield inched slightly lower to 1.36% on Thursday, as the weak French PMI’s reminded that the Euro area economy is not out of the woods yet. In the US the 10-year yield crept higher to 2.55% with the better than expected US data.
Bank overnight lending rate eonia continued higher to 34bp yesterday, a further reminder that the turn of the month is approaching again.
European elections keep markets cautious today. In addition, reported casualties in Eastern-Ukraine ahead of the presidential elections and the seizure of power by the military in Thailand keep the tensions high.
The safe haven government bonds should be bid today and the yields edge lower.
Election frenzy
According to WSJ the early indications from the Dutch European elections show the two pro-European parties taking the lead. The anti-euro Party for Freedom is gathering 12% of votes, 5% less than in the last European elections.
The results of the European elections are out on Sunday night. Euro-sceptics are probably getting stronger, which could translate into a change in the national politics. Policies may shift further from the reforms.
Political risks keep the markets cautious today, but the effect should stay short-lived.
Ukrainian presidential elections on Sunday are one more reason to stay cautious ahead of weekend. If no candidate wins a simple majority, the process will go to a second round. After election the comments from Russia and the Western world will be crucial for the markets.
Cut the leg, patient’s suffering
Manufacturing PMI for the Euro area slightly declined as expected. Service component went up. New orders and export orders in manufacturing don’t give a reason to worry.
German numbers were stable highlighting the strength of domestic demand. France, however, delivered a disappointment. Again. French PMIs came down to below 50 and new orders and new export orders are below 49. The French economy stagnated in Q1 and it does not look much better for Q2.
France needs so much more to get back to healthy growth than what the ECB can deliver. It’s about time the French patient gets the necessary treatment.
Spanish and Greek ratings lifted
S&P upgraded its credit rating on Spain to BBB from BBB-. Outlook is stable. Upgrade is based on improving economic growth and competitiveness. S&P was behind the curve with its Spanish ratings so the move does not come as a big surprise.
Fitch upgraded its credit rating on Greece to B from B-. Outlook is stable. The upgrade reflects improving general government primary balance and the over-performance relative to budget.
S&P today affirmed its AA+ rating on the Netherlands and kept the outlook stable.
French and British ratings, US home sales,…
Moody’s has a chance to update its view on French and British ratings today. Elsewhere on the calendar we have German IFO and GDP numbers and US new home sales. ECB will publish the LTRO repayment data.
Nordea