Surprise bounce in services flash PMIs in France and Germany means new dilemma for ECB

Brasserie servicios

Santander Corporate & Investment’s flash services PMIs released this morning will once again be a headache for the ECB, as they show an unexpectedly strong rebound in France at a delicate time of rallies (56.3, 53.5e, 53.9p). But also in Germany (55.7, 53.4e, 53.7p). And at a time when services inflation remains one of the real workhorses as our economists recalled after the release of the final March figure a few days ago. The recovery in sentiment, first in business and visible in Deloitte’s latest UK CFO survey (post SVB) and now also in household sentiment, as shown for example yesterday by GfK (14-month high) is also very relevant.

Although they may be recovering lost ground, the fact is that, despite everything, the European stock market is still in the area of historic highs. And it is probably dragging down many other assets such as the credit market. The key will be whether corporate earnings really hold up, and that is why the results season and guidances will be critical in the coming quarters.

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