Mixed PMI data fails to stifle mainland European markets

• Mainland European markets push higher despite mixed manufacturing PMI data
• Bitcoin pushes into 21-month high
• Big week ahead, with eurozone CPI, Fed minutes, and US jobs data dominating

European markets have kick-started the New Year with the resolution to build on the strength seen throughout recent months. Outperformance in mainland Europe has seen the DAX push up 1%, reaching the highest level since May 2023. This comes despite mixed signs for the Chinese manufacturing sector, with the weekend’s headline manufacturing PMI decline (to 49) balanced off by an improved Caixin figure this morning (50.8). PMI data looks to dominate much of today’s session, with marginal improvements to the final revision to the French and German manufacturing PMI surveys helping to push the wider eurozone reading into a seven-month high of 44.4. Nonetheless, this deep contraction continues the highlight the case for a swift pivot from the ECB this year, with the eurozone economy continuing to struggle under the weight of elevated interest rates. All eyes turn to the eurozone CPI figure on Friday, with another move lower expected to maintain the downward trajectory.

Crypto looks to be setting itself up for a big year ahead, with Bitcoin rising into a fresh 21-month high on anticipation of the likely approval of the spot Bitcoin ETF product that will see Wall Street finally gain a strong presence in the industry. There has been plenty of concern that this pre-ETF run-up could represent a ‘buy the rumour-sell the fact’ situation, raising questions over the sustainability of this run that has seen Bitcoin gain 76% in the last four-months alone. Nonetheless, with interest rates expected to fall, risk assets such as Crypto look particularly attractive as we approach the hotly anticipated April halving event.

This week looks to bring traders back to their desks with a bang, as we buckle up for a raft of data that should help shape expectations after a period of bullish exuberance. The recent pricing around Federal Reserve easing looks to have gone a step too far, with the Dot Plot mapping out three hikes this year rather than the six cuts expected by the markets. Wednesday’s Fed meeting minutes could help hammer home the disparity that currently exists between market and Fed rate expectations. Continued disruption in the Red Sea provides a potential inflationary bump in the road, with markets likely to watch closely for any signs that this is feeding into the economy over coming months. That being said, this week’s data will focus on eurozone inflation and US jobs, which should maintain a relatively stable environment for bulls given the likely continued weakness in both payrolls and CPI.