Global March Flash PMIs and Potential for Banking Contagion

Traders are likely to be very interested in the upcoming flash PMIs from around the world because it’s the first data since the outbreak of the banking chaos. A lot has been happening to the markets to push around sentiment, with currencies and stocks experiencing wide swings.

Whether or not the turmoil is likely to continue has a lot to do with the underlying economy, and whether the issues in the banking sector have led to companies deciding to hold off on spending. If PMIs show a substantial drop into contraction, it could cause further unease in the markets as the broader impact of the banking collapse would have to be assessed. On the other hand, if PMIs remain stable, it could help return some confidence in investors. While the collapse of a few banks may be dramatic, it’s ultimately the underlying health of the economy that will define the market’s trajectory.

An uncertain future

We have to remember that there was a lot going on over the last month that could have caused some haziness around expectations for PMI. The survey is ongoing, with the bulk of the responses likely having come over the last week or so. That would coincide with the takeover of Credit Suisse, and the shifting expectations for what central banks will do to deal with the crisis.

Not only could that cause some uncertainty in the projections for the flash data, but there could be a larger revision later when the final number comes out at the start of next month. Particularly if the market situation calms down over the coming weeks and more respondents come back with an upbeat tone. This could help the market overcome a result slightly worse than expected. But by all accounts, the market appears to be nervous about any new risk fronts, so PMI could have a larger impact on market sentiment going into the weekend.

What to look out for

Australian Flash PMIs are expected to be stable, for all practical purposes. Manufacturing PMI is expected to tick up to 50.5 from 50.4, while services is expected to improve to 50.7 from 50.5. Australia is benefitting from being removed from the latest bank issues, and thawing of relations with China that have seen the Asian giant once again allowing imports of coal from Down Under.

French Flash PMIs as usual are expected to set the tone for the EuroZone, since it’s the first of the major countries to report. Analysts are forecasting a mixed bag of results, where the Services sector benefits from unseasonably warm weather. But industries are seen being impacted by ongoing strikes. Manufacturing PMI is expected to drop a bit to 47.4 from 48.0, while Services PMI is expected to improve to 53.1 from 52.5 prior.

German Flash PMIs are expected to show German services practically unchanged at 50.9 compared to 51.0 prior. Manufacturing, however, is expected to show Germany hasn’t completely escaped the effects of the winter, as it’s forecast at 46.3 compared to 47.0 prior.

UK Flash PMIs are also expected to diverge, with industry affected by strikes but services benefiting from lower energy costs. Meanwhile, the Chancellor announced the Spring Budget, forecasting no recession this year. Manufacturing PMI is expected at 49.3 compared to 49.8 prior, while services PMI is expected to improve to 53.5 from 53.0 prior.

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