EUROZONE DATA: German and French Service PMI Weakness Starting To Drag Elsewhere
The Eurozone composite PMI disappointed in the flash May release, surprisingly falling to 49.5 (cons 50.6) after 50.4 in April for its first sub-50 reading in five months. Full press release here.
- The weakness was led by services at 48.9 (vs cons 50.5 after 50.1) for its lowest since Jan 2024. That in turn was driven by a particularly weak German reading at 47.2 (vs cons 49.5 after 49.0) for its lowest since Nov 2022.
- Manufacturing at least firmed a touch more than expected to 49.4 (cons 49.2) after 49.0 in April for its highest since Aug 2022. It has been sub-50 since Jun 2022 but has at least recovered from 45.1 as recently as December.
- For services specifically, the surprise slide in German activity left it on similar footing to France, which inched 0.1pt higher to 47.4 for a third reading with a 47 handle after a particularly low 45.3 in Feb.
- Countries other than Germany and France are still doing a lot of the heavy lifting in service activity, although our rough calculation suggests further moderation here as well. Specifically, we estimate a service PMI ex Germany & France fell from 53.2 to 51.6 for its join lowest since Jan 2024. This had been 53.9 in Feb and whilst there can be a 0.1-0.2pt margin of error, the trend direction is clear.
- Back to EZ wide price components, manufacturing input costs decreased by the most since Mar 2024 which helped see selling prices fall for the first time in three months. Conversely, services input costs “were up sharply again, with the pace of inflation slightly stronger than in April” which fed through to a rise in services charges. Composite output price inflation eased to a seven-month low.
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EGBS: Thursday’s High Contains Bund Futures For Now
Thursday’s high of 131.83 has contained upside in Bund futures so far this morning, shielding the April 7 high and bull trigger at 132.03. The contract is +10 at 131.81, having now fully recovered from the sharp German fiscal announcement-induced selloff in early March, with tariff-related growth risks driving dovish ECB repricing in the weeks since.
- There wasn’t much reaction to yesterday’s weakness in US Treasuries, which was largely in response to US President Trump’s continued threats against Fed Chair Powell’s position.
- The German curve has bull steepened, with 2-year yields down ~2.5bps despite 5bln of the new 1.70% Jun-27 Schatz on offer at 1030BST.
- No tangible outperformance in 10-year GGBs to S&P’s rating upgrade (to BBB; Outlook Stable) on Friday after hours (spread unch today at ~87.5bps), with Greece’s improving fiscal trajectory already well documented.
- ECB’s Rehn re-iterated that US tariffs may have a negative impact on Eurozone inflation in the short-term, albeit with conflicting impacts in the medium term.
- The ECB’s Q2 Survey of Professional Forecasters was conducted between April 1-4th, so is already quite stale given the latest US tariff developments.
- Flash April consumer confidence is due at 1500BST today, with ECB President Lagarde also set to speak with CNBC at that time. We don't expect much deviation from Lagarde compared to last Thursday's dovish press conference.
AUSTRALIA: 3rd Leaders' Debate At Bottom Of Hour; Early Voting Underway
As MNI noted earlier (see 'FOREX: AUD Crosses - Tread Water As USD Sold Across The Board'. 0158BST), early and mobile voting are now underway ahead of the 3 May federal election. Opinion polling showa PM Anthony Albanese's centre-left Australian Labor Party (ALP) in an increasingly-strong position, with a growing advantage in the two-party-preferred-vote and ahead of the centre-right Liberal/National coalition in a primary vote poll for the first time since Oct 2023.
- The third leaders' debate between Albanese and Coalition leader Peter Dutton gets underway on the Nine Network at the bottom of the hour.
- In the 2022 federal election, 36.9% of all ballots cast were done so in the early voting period, while 14.3% were postal ballots, resulting in less than half the total number of votes being cast on election day.
- There will be some focus on whether early voting can result in a different outcome than expected, as it limits the impact of late policy announcements or political gaffes on behalf of a party or candidate. However, an individual who has long made up their mind over which party they are going to back will be more inclined to vote early, compared to a swing or floating voter who is yet to decide, allowing more time for the campaign to make an impact on their decision.
- Political betting markets now give Albanese an 84% implied probability of winning re-election, up from 51% on 28 March when the election was called, and a recent low of 27% on 24 Jan.
Chart 1. Political Betting Market, Next Australian Prime Minister?, Implied Probability %
Source: Polymarket
AUSTRIA T-BILL AUCTION RESULTS: 3/6-Month RATBs
| Type | 3-month ATB | 6-month ATB |
| Maturity | Jul 24, 2025 | Oct 30, 2025 |
| Allotted | E780mln | E779mln |
| Previous | E803mln | E822mln |
| Amount | E1bln | E1bln |
| Target | E1bln | E1bln |
| Previous | E1bln | E1bln |
| Avg yield | 2.110% | 1.960% |
| Previous | 2.250% | 2.410% |
| Bid-to-cover | 1.69x | 1.8x |
| Previous | 1.78x | 2.76x |
| Bid-to-offer | 1.32x | 1.4x |
| Previous | 1.43x | 2.27x |
| Previous date | Mar 25, 2025 | Jan 28, 2025 |
