German Election and PMI Data Set to Shape Global Market Movements
Friday brings a slew of purchasing managers’ index (PMI) readings as investors in Germany focus on the upcoming general election on Sunday following the collapse of Chancellor Olaf Scholz’s three-way coalition.
- Euro zone and Britain will release February PMI figures ahead of the U.S. data later in the day.
- These numbers may start revealing the impact of U.S. President Donald Trump’s tariffs as businesses rush to process orders before facing import duties.
European Market Expectations
Euro zone PMIs are expected to show further growth expansion, supported by an uptick in services and easing in the prolonged downturn in manufacturing.
- Growth in services may help offset the manufacturing sector’s recent struggles.
- Manufacturing recovery will be a key point of focus in the U.S. PMI readings as investors watch if recent expansions are maintained.
UK Retail Data and Consumer Sentiment
The UK is also set to release January retail sales data later in the day, with markets anticipating a modest recovery after a December drop in sales.
- Retail sales are expected to have improved, driven by consumer spending after a weak end to 2024.
- A recent survey shows a shift in consumer sentiment, with expectations improving due to the Bank of England’s interest rate cuts.
German Elections and Political Pressure
Sunday’s German election is likely to result in a conservative-led coalition government under Friedrich Merz, with a potential need for additional coalition partners to govern effectively.
- The CDU/CSU bloc is expected to win, but may face challenges in forming a stable government.
- The political shifts could lead to pressure for economic reforms and counteractions from populist movements.
Currency and Global Market Movements
Ahead of the election, the euro remained steady at $1.0501, helped by a weaker dollar that is on track for its third consecutive weekly loss.
- The weaker dollar has supported the euro and could influence trading dynamics in the foreign exchange market.
Asian Market Activity
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan reached a three-month high, driven by the growth in Chinese stocks amid optimism surrounding technology and artificial intelligence (AI) companies.
- Hong Kong’s Hang Seng Index surged to a three-year peak, fueled by technology sector performance.
- Investment banks are increasingly bullish on China, signaling a shift in investment sentiment after years of pessimism.
Key Developments to Watch
Key events on Friday that could influence market dynamics:
- Euro zone, UK, and U.S. preliminary PMI readings for February.
- UK retail sales data for January.
- Speeches by Federal Reserve Vice Chair Philip Jefferson and European Central Bank board member Philip Lane.
