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Market news - 22 February 2019

by  Niloofar Rafiei  |  22 Feb 2019


  • The minutes of the Fed’s late-January meeting were published this week and evidenced a slightly more hawkish tone than the post-meeting statement and the press conference. On balance, further hikes are a somewhat higher probability than cuts (but in practice it is unlikely to be more than one or two over the next twelve months).
  • It is clear that the discussion on ending balance sheet run-off is very rapidly coming into focus – that process will very likely be concluded in the second half of this year.
  • A “technical note” prepared by Fed staff is likely to be published alongside the post-meeting statement at the next meeting in mid-March, discussing the modalities of ending balance sheet run-off and the optimal size of the Fed balance sheet size (or more precisely, the optimal amount of reserves), though this is likely to be somewhat flexible and avoiding pinpointing a precise dollar amount. 


  • The eurozone composite PMI rose 0.4 points in February to 51.4 (consensus: 51.1). The manufacturing PMI fell into contractionary territory at 49.2, with new orders falling at the fastest pace in almost 6 years. On the other hand, services came in slightly stronger than expected at 52.3 (consensus: 51.3). Germany saw further divergence in sector performance – whilst service PMIs were stronger than expected (55.1), manufacturing PMIs continue to indicate contraction (47.6). France saw a marked improvement in survey results, although both manufacturing and service PMIs still indicate contraction, leaving the composite at 49.9 (consensus: 48.9).
  • A similar pattern was seen in US PMIs, with disappointing manufacturing (53.7 vs 54.8 expected) being offset by strong services (56.2   vs 54.3 expected).


  • UK labour market strength endures regardless of Brexit uncertainty, with 167,000 more people employed between October and December than were in the previous quarter, unemployment at 4.0% and wage gains registering a healthy 3.4% yoy.

Rest of World

  • Equity market gains continued this week with the strongest performance in Asia, despite continued weak industrial activity, trade and business survey data; further positive newsflow regarding the progress of Sino-US trade negotiations re-enforcing market expectations for a rebound later in the year. Commodities extended their year-to-date gains, particularly industrial metals thanks to the anticipated rebound in Chinese demand.