France’s small recovery hit the buffers this morning as both business activity and manufacturing slowed. IHS Markit figures showed the measure of services dropped to 48.7 from 50.4 in February, well below the market expectations of 50.7. Manufacturing also fell to 49.8, from last month’s 51.4. According to Markit, demand for new orders deteriorated especially in the export market, where customer orders fell at the fastest pace for nearly three years, as a result, job creation stagnated.
Germany’s manufacturing slump was even deeper, where the sector fell to the lowest since 2012, to 44.7, way below market forecasts of 48. It’s the third month in a row that the reading has been below 50, signalling a contraction. Principal economist at IHS Markit, Phil Smith, said ‘The downturn in Germany’s manufacturing sector has become more entrenched’ adding ‘Uncertainty towards Brexit and US-China trade relations, a slowdown in the car industry and generally softer global demand all continue to weigh heavily’.
And, following on from a dovish Fed earlier this week, Russia took to the opportunity to come to the market with a well-timed Eurobond issue made up of a USD 5.1% 2035 bond and a tap of the EUR 2.875% 2025 issue. The issue was well received with the USD book closing with over USD7bn of demand against a size of USD3bn and priced at a yield of 5.1%. The €750m 2025 tranche priced at a yield of 2.375% and received over €3bn of orders. The issuance received strong investor demand despite the risk of further sanctions remaining, although it also follows a recent rating upgrade by Moody’s taking Russia to an investment grade rating (Baa3) in line with S&P and Fitch (BBB-).