Market commentary

Good morning!

The European equities pencilled only marginal gains yesterday as the PMI survey pointed to below expectations growth in manufacturing and a stronger European service sector although this was overwhelmingly due to the German performance. Indeed, the data that came out yesterday confirmed yet again the diverging reliance of the Eurozone countries with even a core country like France failing to achieve a PMI that would be indicative of growth (i.e. over 50).

The US session closed as well with minor gains as yesterday’s economic data was mixed; jobless claims and existing home sales were below expectations whilst the results of a manufacturing survey surprised on the upside. Noteworthy, notwithstanding the below expectations reading, the existing home sales rose for the first time this year; today we are expecting the new home sales figures.

The Asian markets had a positive trading session overnight after a Chinese newspaper disclosed that it was informed that the Chinese leaders are preparing to substantially ease real estate controls; this follows the above expectations reading for the Chinese Manufacturing PMI that came out yesterday morning. The Thailand stock exchange was the obvious underperformer in the region with a 1.48% decline following the military coup that was announced yesterday. The chief army of the already shrinking economy said yesterday that the military council took control of the country and that the constitution is suspended. Elsewhere, in emerging markets we note the surprise easing of the monetary policy in Turkey where the Central Bank cut the one-week repurchase rate but left the overnight rates unchanged; the unexpected cut comes after the politicians’ repeated calls for stimulating lending.

Looking ahead, we would expect today only marginal if any gains given the heavy political week-end that is pending. The elections for the European Parliament have long been quoted as anon-trivial market factor as many fear that the Euro-sceptics will fare well. Against, this background, the peripheral bonds would likely see some downside pressure as has happened over the last few days. Also, Ukraine is struggling to take hold of the separatists in the country, especially as these have become increasingly violent ahead of elections scheduled for Sunday May 25. The authorities reported that 16 soldiers were killed yesterday in the most serious clash so far with the pro-Russian protesters. Meanwhile, Russia is stating that it is reducing the number of troops at the country’s border in order not to unduly disturb the elections; NATO in turn says that minimal steps were taken in this respect.

Have a nice day!

Raluca