Market movers today
In the US, the preliminary consumer confidence data from the University of Michigan. Consumer confidence has risen significantly since Donald Trump’s election victory but we think it will decline slightly from 98.5 to 97.5. However, this is still a high level, supporting our view that private consumption continues to be the main growth engine in the US.
US President Trump is scheduled to meet with Japan’s Prime Minister Shinzo Abe in Japan where much focus will be on trade relations. The meeting follows this morning’s phone call between Chinese President Xi Jinping and Trump (the first under Trump’s term, in which Trump reaffirmed the long standing ‘One-China’ policy stance.
In the UK, industrial production and construction data for December will reveal whether we should expect revisions to the first estimate of Q4 GDP growth of 0.6% q/q. The NIESR GDP estimate for January is also interesting, as it has been a quite good indicator for actual GDP growth.
In a thin euro area calendar most market focus will be a speech by ECB’s Weidmann.
After several strong labour market reports in Canada, markets will look for some setback amid the highest quarterly change in the number of employed since 2012.
In the Scandies, focus is on the inflation prints due in Norway and Denmark. For more info see ‘Scandi Markets’ on page 2.
Selected market news
Markets reacted strongly yesterday to US President Trump’s comment that a ‘phenomenal’ tax plan is in the pipeline which could be released within the next ‘two or three weeks’. While not concrete, markets found comfort in the comments as it highlights tax reforms are still an important part of Trump’s plans after the primary focus during his term in office so far has been on trade and immigration policies. Equites and the USD rose while US 10Y Treasury yields rebounded after the last days’ rally.
sentiment has spread to Asian equities that were also supported by the Trump-Jinping phone call (see above) and better-than-expected Chinese trade data. We do, however, warn against putting too much emphasis on the trade figures, as they tend to be very volatile and distorted.
In the US, a federal appeal court ruled unanimously against the Trump administrations’ bid to reinstate the disputed travel ban on citizens from seven Muslim-majority countries. Trump reacted promptly on Twitter (see tweet) suggesting a US Supreme Court review is likely.
In the fight against soaring inflation on the back of the weaker MXN and rising fuel prices, Bank of Mexico yesterday hiked rates by 50bp to 6.25%. The central bank has thereby hiked rates at four consecutive monetary policy meetings.
While yesterday’s GDP release out of Norway, as expected, revealed the lowest annual mainland growth rate (0.8%) since the financial crisis, we do think the details had some positive aspects worth mentioning. For instance the release showed the first aggregated yearly rise in business investments since 2012 and the fact that oil investments rose in Q4 16 (for the first time since 2013) is encouraging given the large supply side’s dependence on petroleum industries. As headwinds gradually fade for the oil sector, consumer’s purchasing power improves and as global growth has rebounded, we look for just below potential growth this year around 1.5%- 2.0%. We still expect Norges Bank to keep rates unchanged for at least the coming year.