By Jonathan Cable
LONDON (Reuters) – Euro zone business activity unexpectedly grew this month, a preliminary survey showed, but with much of Europe suffering a third wave of coronavirus infections and renewed lockdown measures, that may not last through April.
Factories ramped up output at the fastest monthly pace in over 23 years, countering a continuing slowdown in the currency bloc’s dominant services industry, which is far more vulnerable to lockdowns and the region’s slow vaccine rollout.
IHS Markit’s flash composite PMI, seen as a good guide to economic health, bounced above the 50 mark separating growth from contraction, to 52.5 in March compared to February’s 48.8, its highest since late 2018.
Even the most optimistic respondent in a Reuters poll had forecast it would rise to 51.0, while the median predicted only a modest increase to 49.1.
“March’s rise in the euro zone composite PMI pushed it back above the 50 mark for the first time in six months, but the recent tightening of restrictions in a number of countries suggests that the improvement will not be sustained,” said Jessica Hinds at Capital Economics.
Indicating Europe’s largest economy was so far shrugging off pandemic lockdowns, German factory activity rose to a record high and the services sector expanded after five successive months of contractions.
In France, the 19-country euro zone’s second-largest economy, activity held up better than expected, with manufacturing surging ahead at the fastest pace in more than three years.
A rush of new orders in anticipation of an easing of lockdown restrictions, and Britain’s swift roll-out of COVID-19 vaccines, also prompted a much stronger rebound for British companies, who are outside the euro zone and the European Union.
A flash PMI covering the euro zone services industry rose to 48.8 from February’s 45.7, still in contractionary territory but its highest reading since August, and well above the median expectation in a Reuters poll for 46.0.
A big jump in input costs led services firms to increase their prices for the first time in just over a year. The output prices index climbed to 50.8 from 48.1.
Any sign of increasing price pressures may be welcomed by the European Central Bank, which has struggled to get inflation anywhere near its target, but a Reuters poll earlier this month suggested the pick-up would be shortlived. [ECILT/EU]
Meanwhile, booming demand for manufactured goods helped the flash factory PMI soar to 62.4 from 57.9, comfortably the highest reading since the survey began in June 1997 and well above all forecasts in a Reuters poll that predicted 57.7.
An index measuring output, which feeds into the composite PMI, jumped to a survey high of 63.0 from 57.6.
The manufacturing upturn was led by a record surge of factory production in Germany, accompanied by the fastest production growth since January 2018 in both France and the region as a whole, IHS Markit noted.
That jump in output came as euro zone factories tried to meet soaring demand, also at a survey high, with the new orders index at 64.2 versus February’s 57.8.
“The manufacturing sector seems to be in boom territory at the moment,” said Bert Colijn at ING.
“New orders increased in March, with export orders growing especially quickly, indicating that the euro zone profits from the rest of the world being much more open in this phase of the pandemic.”
Meanwhile, hopes the vaccine programme would accelerate and allow a return to some sort of normal life, optimism remained elevated. The composite future output index only dipped from February’s three-year high of 67.0 to 66.8.
(Reporting by Jonathan Cable; Editing by Catherine Evans)
CANADA STOCKS – TSX ends flat at 19,228.03
* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03
* Leading the index were Corus Entertainment Inc <CJRb.TO>, up 7.0%, Methanex Corp, up 6.4%, and Canaccord Genuity Group Inc, higher by 5.5%.
* Lagging shares were Denison Mines Corp, down 7.0%, Trillium Therapeutics Inc, down 7.0%, and Nexgen Energy Ltd, lower by 5.7%.
* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.
* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.
* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.
* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude fell 0.24%, or $0.15, to $63.05 [O/R]
* The TSX is up 10.3% for the year.
Canadian dollar outshines G10 peers, boosted by jobs surge
By Fergal Smith
TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.
Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.
“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”
Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.
The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.
The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.
Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.
The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.
Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.
(Reporting by Fergal Smith; Editing by Andrea Ricci)
Canadian dollar rebounds from one-week low ahead of jobs data
By Fergal Smith
TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.
The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.
“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”
Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.
The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.
Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.
On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.
Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.
(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)