Eurozone week ahead: PMI, Italy and ECB minutes - Danske Bank

Next week key events in the Eurozone includes EC opinion on Italian budted, PMI data and Europena Central Bank minutes. Analysts at Danske Bank, expect another decline in EZ manufacturing PMIs in November and they see the European Commission starting the process of opening an excessive deficit procedure (EDP) against the country relatively quickly.

Key Quotes: 

“In the euro area, PMIs for November are due on Friday. In October, manufacturing PMI fell for the third successive month and came in at 52.0 and services fell to 53.7 from 54.7 in September. We expect another decline in manufacturing PMI due to the still negative order-inventory balance and forecast the November print to come in at 51.5. For Service PMI it will be interesting to see whether the weaker activity in October was of a temporary or more persistent nature. We expect the former and hence see scope for a small rebound in service PMI to 54.”

“The European Commission is expected to issue its final opinion on Italy’s budget on Wednesday. Since Italy refrained from material changes to its budget, we expect the European Commission to start the process ofopening an excessive deficit procedure (EDP) against the country relatively quickly. The Italian bond market could come under renewed pressure if an EDP is formally
launched.”

“We also get ECB minutes from the 25 October meeting on Thursday. During the meeting, no significant new policy guidance was announced. However, the minutes may contain colour on the upcoming crucial 13 December meeting, in terms of ending the APP and the shift to more conventional policy tool guidance. We will naturally also focus on the inflation and growth assessment. Recall that Draghi only mentioned downside risks to the ECBs growth outlook, while still keeping the outlook broadly balanced.”