Preliminary data on S&P Global’s leading private sector PMI came in stronger-than-expected for most of the world’s largest economies in February, boosting investor optimism that risks to the global economy are down, at least in the short term.

In particular, after a series of positive data from the US in recent weeks, indicating that the economy is likely to avoid the possibility of a “hard landing”, despite a significant increase in interest rates since March 2022, the corresponding index unexpectedly, albeit slightly, rose above the critical level of 50 points that separates growth from contraction for the first time since June 2022 (50.2 from 46.8 in January). Relevant data from the Eurozone also surprised upwards, with the composite PMI rising to its highest level in nine months (52.3 from 50.3), helped by a significant improvement in services sector activity. The index is broadly in line with eurozone quarterly GDP growth of just under 0.3%, according to S&P Global, raising investor optimism that initial estimates of a winter 2023 recession are likely to be refuted.

Along with the improving economic outlook, inflation in the US and the Eurozone remains well above the medium-term target of their respective central banks. This, coupled with continued strong labor markets in the US and the Eurozone, continues to fuel speculation that the Fed and ECB may raise interest rates even more aggressively in the coming months to dampen inflationary expectations and risk to each other. wages and prices.

In the futures market, the Fed’s rate hike cycle is now expected to end in July with an ending rate of 5.37% (vs. 5.15% two weeks ago and 4.80% in early February), implying an overall further 75mb hike. against 50 m.v. as suggested by the latest estimates by the Fed itself, while the ECB is projected an additional overall increase of about 120 basis points.

* Department of financial analysis and research of international capital markets of Eurobank.