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StockBeat: Services PMI Horror Show Sends Markets Lower

Stock MarketsApr 03, 2020 05:29AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Europe’s stock markets took another dip on Friday after the round of final purchasing manager indices for the month confirmed what amounts to a sudden stop in the economy all across the continent.

By 6:25 AM ET (1025 GMT), the benchmark STOXX 600 was down 0.9% at 309.24, on course to end a volatile week fractionally lower. The German DAX was down 0.6%, while the FTSE 100 was down 1.2%.

Consultancy IHS Markit revised down its flash PMIs across the board, principally because the numbers from the services sector, which accounts for the bulk of activity in every eurozone economy including Germany, were so dismal.

In Italy, the services PMI fell to 17.4, from 52.1 in February. That’s the lowest number Markit has ever reported for any of its PMIs, ever - worse even than Greece at the depths of its recession in the last decade. The Italian numbers led to the FTSE MIB being the worst performer in the region, down 1.5%.

The overall eurozone services PMI fell to 26.4, from 52.6. The only consolation, noted Paul Donovan, UBS Global Wealth Management chief economist, is that the surveys may be distorted by the nature of responses.

“You have to be a pretty unusual person to fill in a survey in this situation, which may create a bias – we do not want the views of unusual people to be presented as the views of the majority,” Donovan said.

The numbers “are now so far out of any reasonable range that they are difficult to interpret,” said Claus Vistesen, eurozone economist with Pantheon Macroeconomics. Vistesen’s base case is that eurozone GDP fell 4% in the first quarter and will shrink a further 10% in the current quarter, “based on the notion that activity will be at a hold in April and most of May.”

The Stoxx 600 Banks index, a (very) rough proxy for the service sector, fell 1.4%, as BNP Paribas (PA:BNPP) and Banco Santander (MC:SAN) fell into line with other big institutions in suspending their dividends.

Regulators in Frankfurt and London are desperate to ensure that the continent’s banks avoid asking for fresh bailouts, aware of the political difficulties that would create. However, given the surge in bad loans that seems inevitable against a backdrop of such awful macro numbers, the risk of such action (and the further dilution of existing shareholders) is already being priced in.

StockBeat: Services PMI Horror Show Sends Markets Lower
 

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Comments (4)
michael engel
michael engel Apr 03, 2020 7:29AM ET
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SPX weekly in the battle of Feb 5 2018(L) @ 2532.69 and ma200. The DOW will try to jump > Dec 2018(L).
James Hilton
James Hilton Apr 03, 2020 7:01AM ET
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PMI plummeted? You're joking...
Justin General
Justin General Apr 03, 2020 6:44AM ET
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of course they are a horror show, just like 6.6 mil job claims on top of the 3.6 last week, it's like an 8 standard deviation but sticks ripped higher, why not? I'm surprised stock futures didn't rip 3000 points higher on a 17.2 pmi print at this point.
Leif Seed
Leif Seed Apr 03, 2020 6:44AM ET
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A trillion dollars of free money to be jacked into the market, 50-100 billion of loans per day?
alexandros alexopoulos
alexandros alexopoulos Apr 03, 2020 6:33AM ET
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The spread of the virus is slowing gradually. This will lift the sentiment in population and then to the markets in the next couple of weeks. Lots of improvement ahead before the actual economic number arise.
Deepak Mangtani
Deepak Mangtani Apr 03, 2020 6:33AM ET
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I really don't know which website do u use to track the spread of the virus. Slowing? It's infecting 76,000 ppl everyday, it was spreading at the rate of 55,000 just 4 days ago, so that's and increase of 21,000 cases per day, in matter of just 3 days.
 
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