Headlines in 2 Germany newspapers unveiled doubts about the Troika among ECB policymakers. The immediate aftermath of the Italian election was the decline of the Sentix index. Meanwhile, the market focus was China’s property tax measures. This, together with the drop in non-manufacturing PMI in the world’s second largest economy, caused the CSI300 to plunge more than -4%. Wall Street climbed higher on late trading with the DJIA and the S&P 500 indices gaining +0.27% and +0.46% respectively.
Die Welt reported that some ECB members were worried about the central bank’s participation in the Eurozone rescue efforts as these might create a conflict of interest and compromise its independence. The newspaper cited that “the level of discomfort has reached such a level that there are considerations among some important members of the ECB to leave the troika entirely”. Yet, ECB board member Joerg Asmussen commented that the ECB would not leave the troika and stressed that the members “don’t see any threat to our independence while we are participating in the troika". Asmussen stated that “the ECB participation in the troika is key. We have great knowledge about Europe, its institutions, its economy and we especially provide expertise on macroeconomic and especially financial sector issues. We will not withdraw from the troika”.
In China, the non-manufacturing PMI slipped to 52.1 in February from 54 in January. Yet, the key issue leading to the selloff of Chinese stocks was concerns over government’s measures to control property price rises. These measures include an increase in income tax on homeowners who made profit from a property sale. If one buys a second home in cities where property prices increase rapidly, he/she has to pay higher interest and down payments home.
The RBA left the cash rate unchanged at 3% in March. Policymakers stated that further easing might be required as inflationary conditions remained benign. On the dataflow, the Eurozone retail sales probably added +0.3% m/m in January, following a -0.8% decline a month ago. The final data for services PMI might have stayed unchanged in 47.3 in February. In the US, the ISM non-manufacturing index might have slipped -0.2 point to 55 in February.
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