Market movers today
There are no tier 1 data releases today, but there will be some focus on speeches by t he Fed’s Vice President, Bill Dudley (voter, neutral) and ECB President Mario Draghi in Sintra tonight (19:30 CET).
On top of the US-China trade spat , focus this week will be on euro PMI for June, the Bank of England and the OPEC meetings. See Weekly Focus, 15 June 2018.
There is also a Eurogroup/Ecofin meeting at the end of the week, where Greece is expected to be back on the agenda given that it is set to exit the last bailout programme in August.
In Scandi markets, the Norges Bank meeting will take centre stage and Swedish manufacturing confidence is up for release as well.
On Wednesday, we are due to release our Nordic Outlook with new forecasts for the Nordic countries.
Selected market news
Global trade war concerns have made a comeback. As a response to the US move to levy tariffs on USD50bn of Chinese goods, China said on Friday that it will impose tariffs wit h ‘equal scale, equal intensity’ on US imports and cancel its earlier trade commitments. Whereas US tariffs are aimed to curb China’s indust rial advancement , Chinese tariffs are primarily aimed at hurt ing the commodity producers of the American heart land. The first wave of 25% tariffs will hit USD34bn in goods and take effect on 6 July, with another USD16bn st ill to be reviewed. Trump pledged more penalt ies if China follows through and we see a high likelihood that he will increase the amount of Chinese imports subject to tariffs to USD15 0bn quite soon.
Financial markets on Friday remained fairly calm in light of the mount ing t rade frict ions. The S&P 500 closed down 0.1%, but t rade-sensit ive sectors including tech hardware and indust rials led decliners. Asian stocks followed US equit ies lower this morning and US stock index futures point to further declines. EUR/USD is still consolidating around the 1.16 level following last week’s significant drop on ECB’s dovish rate guidance. Oil headed back below USD73/bbl after news emerged that Venezuela and Iraq together with Iran would seek to block a proposal by Russia and Saudi Arabia to increase oil production at this week’s OPEC meeting.
In Germany, a disput e in Angela Merkel’s coalition over migrat ion policy has swift ly escalat ed into one of the biggest tests of her chancellorship. Whereas Interior Minister Horst Seehofer (CSU) wants to force through a plan to send back migrants at the border who h ave already registered for asylum in other EU states, Merkel rejects the proposal as offloading the burden onto neighbouring states, and says it would endanger efforts to forge an EU-wide response to migrat ion. Merkel has asked the CSU to hold off implementation of the new measure for two weeks, and give her unt il the next EU summit on 28-29 June for talks with other EU count ries to st rike bilateral deals. A compromise solut ion hence seems likely at this stage, but further escalat ion between the polit ical camps could easily result in a confidence vote on the chancellor and a possible break in the governing coalition.
