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European markets up ahead of ECB, UK stocks down ahead of BoE

FXstreet.com (Barcelona) - The German DAX 30 (+0.31%), the French CAC 40 (+0.89%), the Italian FTSE MIB (+1.30%) and the Spanish IBEX 35 (+1.34%) are rising after PMI services figures and ahead of the ECB meeting and press conference.

The EMU PMI Services fell from 47.9 to 46.4 in March, below 46.5 consensus. The Composite figure eased from 47.9 to 46.5 in March, below 46.5 consensus. The French and German figures were expected to fall from 43.7 to 41.9 and 54.7 to 51.6, but actual March PMI Services data points to a drop to 41.3 to 50.9, respectively. Both Spanish and Italian data were the upside surprise, from 44.7 to 45.3 (consensus of 44.2) and from 43.6 to 45.5 (consensus of 43.5).

About the ECB meeting scheduled at 11:45 GMT, “we still expect the ECB to cut but today is premature and today could be more about Draghi reassuring the markets that progress is being made”, wrote BTMU analyst Derek Halpenny. Camilla Sutton, Chief Strategist at Scotiabank, expects Draghi to sound more dovish after the 12% unemployment rate and the March PMIs. Richard Barnwell and Xinying Chen at RBS see more scope for action in June, “but in order for that to happen, we would need to see sufficient bad news on the macroeconomic front”. Jim Reid, analyst at Deutsche Bank, are more interested in Draghi’s press conference and what he has to say about Cyprus. Emile Cardon, Strategist at Rabobank, said a rate cut by the ECB at this point would smack of uncertainty if not outright panic among the Governing Council. Christin Tuxen, analyst at Danske Bank, believes a refi rate cut would EUR negative to the extent it leads to a flatter EURIBOR curve, with a EUR/USD dip below 1.27.

Also today is the BoE announcement, at 11:00 GMT: “The BOE decision in the wake of the announcement of a remit change could be more interesting given Governor King is pushing for restarting QE. The Cyprus shock won’t help the UK economy and there is certainly a potential for a surprise from the BOE”. UK Markit Services PMI was also released and rose from 51.8 to 52.4, beating 51.5 consensus. The British FTSE 100 is down by -0.17%.

Futures for the American S&P 500, Nasdaq 100 and Dow Jones 30 are signaling a higher opening by +0.35% ahead of the NY opening and Fed’s Bernanke speech at 14:30 GMT.

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