Market movers today
The data calendar is thin today with no release expected to move the markets.
The most interesting event is likely to be the ECB’s Chief Economist Peter Praet’s speech, as one of the final ECB speakers ahead of the silent period where no monetary policy messages can be conveyed ahead of the Governing council meeting next week. Markets will also digest the latest ‘sources’ from late last night that suggest ed he ECB could change its communication next week.
Focus will also continue to be on the Italian political developments and the new government formation.
Selected market news
Asian equity markets are mixed this morning as investors take a more cautious view amid renewed concerns about Italy and global trade protectionism. Yesterday, the new Italian prime minister held his first speech in the Italian parliament, calling for a review of eurozone rules and governance and saying that debt reduction would only be achieved through economic growth, rather than austerity. On the back of the speech, Italian bonds sold off and these are likely to remain under pressure today.
Ahead of the G7 meeting this week, focus remains on the outlook for global trade given the US’s move to impose tariffs on steel imports from Europe, Canada and Mexico and the failed trade talks between China and the US over the weekend. Yesterday, Mexico unveiled tariffs against US agricultural and st eel products in retaliation to last week’s US tariffs. The Mexican move follows EU and Canadian announcements of similar retaliatory moves, which are prompting investor concerns about the out look for global trade. On the strained trade talks between China and the US.
Bloomberg reported yesterday afternoon that ECB sources say that it will use the ECB meeting next week to discuss the asset purchases and that the meeting could result in announcement on when to end the purchases. However, we remain sceptical that the ECB will change its communication on its asset purchase programme already, especially given the latest bout of weak indicators of euro area economic activity and wobbly market sentiment relating to the new government in Italy. We see a good chance that the ECB’s growth projections will be revised down while headline inflation will be revised slightly up on the back of higher oil prices.
