The week ahead - 19-23 February 2024

The eurozone composite PMI probably increased in February, moving closer towards the 50-level that would be consistent with economic stagnation. The global manufacturing sector seems to be bottoming out at the moment, which should result in a rise in the eurozone manufacturing PMI. Activity in the services sector is expected to benefit from rising real wages and the easing of financial conditions, which is expected to have increased the services sector PMI in February.

China - With headline inflation negative for four months in a row, we expect the PBoC to continue with piecemeal monetary easing, following up on a 50bp cut in bank’s reserve requirements earlier this month. This would be in line with PBoC Governor Pan Gongsheng’s signalling in January, and complement broader efforts by Beijing to stabilise the economy and sentiment. Still, there is a fair chance that the PBoC will wait with mini cuts in policy rates for another month or so, when more data will be available to assess the filtering through of previous support measures and – with a view to currency risks – we have moved closer to the first policy rate cut by the Fed (which we expect to take place in June).