Welcome to your weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last week.
PMI results show that the US is leading the global recovery, followed by the UK
Data from Markit confirmed that the US continues to lead the economic recovery in comparison to other developed economies, with the flash composite PMI for March reading 59.1 compared to 59.5 in February.
The UK PMI provided the largest surprise to expectations, rising from contractionary territory – 49.6 in February – to expansionary in March – 56.6. The average for the quarter still remains below 50 which points to the likelihood in a contraction in GDP, although the latest reading indicates that positive momentum will be= carried into the second quarter.
There was also a rebound in the euro area, with the composite PMI rising from 48.8 to 52.5, however there was a degree of variability between states. Japan continued to lag peers with the PMI indicating the country remains in contractionary territory.
Suez Canal blockage holding up transport route used for 10% of global trade
The Ever Given – measuring the length of 4 football pitches – was marooned across the southern end of the canal, preventing the passage of one of the world’s busiest waterways until Monday. This waterway, which accommodates 50 container ships a day transporting 10% of global trade including more than 1mn barrels of oil per day, has caused significant delays in shipping and once again highlighted the fragilities of global supply chains.
Although there was a brief spike in the price of oil following the event, the consensus has settled that this blockage shouldn’t be a major issue for crude oil supply as the Sumed oil pipeline, which lies to south of the Suez Canal entrance and runs north through Egypt, has been unaffected by the incident and provides a suitable alternative to redirect supply.
Turkey’s President Erdogan sacks central bank governor
Turkey’s long serving President, Recep Tayyip Erdogan, surprised economists and investors on Saturday by unceremoniously sacking the governor of Turkey’s central bank, Naci Agbal. The move followed the decision by the ex-governor to raise interest rates (the one-week repo rate) by 2%, taking the cumulative increase in rates over the last four months to 8.75%.
These efforts were an attempt to tackle Turkey’s price inflation, which is in excess of 15%, had been applauded by currency markets but were opposed to Erdogan’s personal economic philosophy which dictates that higher interest rates are the cause of inflation rather than the counter measure. The Turkish Lira depreciated by more than 10% following the news.
Global equities finished the week up by +0.3%, as measured by the MSCI ACWI ($) index. The main equity market news of the week began on Friday when Goldman Sachs and Morgan Stanley began dumping multi-billion-dollar positions in selected US and Chinese stocks in response to a failed margin call on loans. A family office, Archegos, has since been identified as the guilty party, although there is still relatively little detail about their operations. Credit Suisse and Nomura have since announced that they will probably lose billions of dollars in the fallout. In fixed income markets, volatility in US government bond yields remained elevated although yields were broadly flat over the week.
Look out for next week’s update, where we’ll be focusing on March PMIs around the globe and UK retail sales data.
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