In the US, the ISM Non-Manufacturing Index rose 3.0 points to 59.7 in February, higher than an expected 57.4. The survey’s headline reading improved as business activity and new orders hit cycle highs amid abating economic growth worries and an end to the earlier government shutdown. Meanwhile, new home sales rose 3.7% mom to an annualised 621,000 in December, higher than an anticipated 600,000. Overall, the report confirmed a recovery in activity during 2018’s final months, although November’s growth rate was downwardly revised by a sizable 7.8 percentage points to 9.1% mom. Finally, nonfarm payrolls rose by only 20,000 in February, below an expected 180,000 jobs. The weak headline number grabbed investor attention given heightened growth concerns, although the disappointment followed a string of robust labour market reports. Details showed particular weakness in construction as well as leisure and hospitality roles, segments that could have been impacted by adverse weather during the period. Positively, January’s strong release was upwardly adjusted to 311,000 jobs. Also, the unemployment rate dipped to 3.8% while the annual change in average hourly earnings picked up to 3.4% yoy (+3.3% expected).

In Europe, the final estimate of Q4 eurozone GDP growth was confirmed at 0.2% qoq, following 0.1% in the previous quarter. The expenditure breakdown revealed a rebound in export growth and household consumption, with the strongest contribution from the government sector since Q1 2016. However, there was a large drag from inventories, which likely reflects carmakers shifting accumulated stocks as they caught up with the implementation of new emissions testing guidelines.

As expected at its March meeting, the European Central Bank (ECB) kept its benchmark refinancing rate at zero and the deposit rate at -0.40%. However, the ECB provided a dovish surprise relative to low market expectations by announcing a new set of cheap loans for banks (Targeted Longer-Term Refinancing Operations (TLTROs)), in response to faltering eurozone growth. TLTRO-III will be launched in September 2019 and end in March 2021, one each quarter (seven rounds in total). Each operation will have a two-year maturity. Furthermore, the ECB updated its forward guidance, saying key interest rates will remain at their present levels “at least through the end of 2019” from “at least through the summer.” In addition, the ECB now sees GDP growth of 1.1% this year, from 1.7% previously, 1.6% in 2020 (from +1.7% previously) and unchanged in 2021. Inflation was revised down by 0.4 percentage points (ppts) this year (from +1.6% to +1.2%) and 0.2 ppts in 2020 and 2021 (to +1.5% and +1.6%, respectively). Despite the bleaker economic outlook, ECB President Mario Draghi said that the probability of a recession remained “very low.”

In Asia, Chinese Premier Li Keqiang delivered the Government Work Report at the National People’s Congress, the nation’s parliament. He outlined the economic and social targets, macro policy stance and reform agenda for 2019. The government set the real GDP growth target at 6.0%-6.5%, compared to last year’s target of “about 6.5%.” The CPI inflation target was kept at “about 3%." The government also announced cuts to corporate taxes and non-tax burdens, including fees and social security contributions amounting to CNY2 trillion (or about 2.0% of 2019 GDP). Value-added taxes were also cut, which could benefit the manufacturing, transportation and construction sectors, among others.

China’s external trade data for February came out much weaker than expected, mainly due to Lunar New Year distortions and US-China trade frictions. Exports dropped 20.7% yoy (consensus -5.0%) and imports fell for a third consecutive month (-5.2%, consensus at -0.6%). The sharp decline in exports weighed on the trade surplus, which fell from USD39.2 billion in January to USD4.1 billion in February.

As expected, the Bank of Canada kept its overnight rate unchanged at 1.75%. Policymakers continued to adhere to a data-dependent message but were more guarded regarding further rate hikes, adding that current conditions warrant a policy stance below their estimated neutral range. The shift came amid a sharper than expected activity slowdown in Q4 2018, caused by weaker investment and a further easing in household spending as well as lingering global trade tensions.

Mexico’s CPI inflation slowed to 3.9% yoy in February, modestly below an expected 4.0% yoy. This confirmed that inflation has returned to policymakers’ 2%-4% yoy target range for the first time in more than two years, after a steady interest rate hiking cycle.