Has The Banking Turmoil Impacted Flash PMIs?

Global flash PMIs will provide the first look at the potential broader impact of the banking issues from the last couple of weeks.

A Cautious Look At PMIs

Markets and risk sentiment have swung wildly since the start of the month. Stronger February jobs followed by Fed Chair Jerome Powell's comments before Congress pushed up bond yields. As the market adjusted to the idea that the Fed could tighten more than anticipated, three regional banks were taken over by the FDIC to protect depositors. The subsequent collapse of Credit Suisse indicated this was a global problem. But, since regulators have stepped in to reassure depositors that the banking system is safe, central banks have returned to raising rates as planned. 

While the market showed considerable consternation about the financial events, S&P Global was conducting its usual survey of purchasing managers to gauge business sentiment. If the effects of the financial chaos have spread into the real economy, PMI figures will show the first signs as companies slow or halt expenditures to conserve capital. The relative stability in the PMI figures could help assuage some of the concerns among market makers that the economy is on stable footing. However, a substantial miss from expectations could contribute to the renewed narrative of an impending recession.

Germany Readying for Recovery

As the largest economy in Europe with close ties to Switzerland, there is likely to be increased focus on German figures. February was the critical month for putting winter in the rearview mirror and overcoming any risk of gas shortages. The warmer-than-usual winter conditions have helped lower energy demand and Germany to keep stocks replenished. Germany's DAX was impacted as the Credit Suisse saga unfolded but has subsequently rebounded substantially after broader European banks have not expressed similar difficulties - so far, at least.

Germany Flash March Manufacturing PMI is expected to experience a modest decline to 46.3 compared to 47 in February, staying firmly in contraction. Meanwhile, the first reading for the Services PMI is expected to remain practically stable at 50.9 compared to 51 prior, healthily in expansion.

German DAX Left Flag Behind

The index might have completed a flag down at 14500 on Monday, rallying towards the top again. The short-term indicates a similar formation down at the 15k handle, but further declines might be seen before additional advances past 15300. Breaking higher brings the measured move high of 16200 in focus.

Source: Spreadex / Germany 40

Key Takeaways

Global Flash PMIs will provide the first look at the potential broader impact of the banking issues from the last couple of weeks. The relative stability in PMI figures could help assuage some of the concerns among market makers that the economy is on stable footing. German Flash March Manufacturing PMI is expected to experience a modest decline, staying firmly in contraction, while the Services PMI is expected to remain practically stable and healthily in expansion.