Risk sentiment was rocked in Europe this morning by notably weak German manufacturing PMI data. The preliminary reading for March came in at 44.7 (f/c. 48.0), down from 47.6 in February and constituted the worst reading in over six-and-a-half years. There was a knock-on effect to the pan Euro Zone report as Chief Economist at Markit Chris Williamson warned that the survey “indicates GDP likely rose by a modest 0.2% in the opening quarter”. In response, we saw broad declines across equity space with the Euro Stoxx 600 slipping to a one-week low having opened with modest gains while the Euro dropped below $1.13. However, moves in the bond markets have garnered more attention as the German 10-year yield turned negative for the first time since October 2016. US government borrowing costs followed suit with the 10-year below 2.50%. Elsewhere in FX, Sterling is ahead having shaken off a bout of Euro contagion as investors welcomed the latest developments in the Brexit saga – EU leaders have agreed to delay Article 50 until the 22nd May if UK lawmakers vote in favour of May’s deal next week. However, if the deal fails for a third time, the EU will give the UK until 12th April to indicate a way forward. The Japanese Yen is also placed towards the top of the G10 pile as the perceived safe-haven currency benefits from broad risk aversion. Elsewhere, oil prices are firmly in the red with US crude futures down around one-percent. Spot gold has added +0.3%. Looking ahead, futures are pointing to a lower open on Wall Street. On the data front, we await US PMI data, existing home sales and wholesale inventories plus Canadian CPI and retail sales.
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