Market movers today
We have a very quiet start to an otherwise busy week on the macro front. Today will not provide any key figures, only new economic forecasts from the European Commission. Apart from data and central bank speeches, focus will continue to be on any announcements by Donald Trump on policies and on developments in the French election campaign.
On the macro front, Fed chairman Janet Yellen is due to hold her first semi-annual testimony before Congress since Trump was inaugurated. Focus will be on any guidance on the timing of the next rate hike. We continue to look for a June hike but risks are still skewed towards an earlier hike.
On the global data front, focus will be on US retail sales and CPI, German ZEW index and GDP, UK CPI and Chinese producer price inflation. See Weekly Focus, 10 February 2017 for more on this.
In the Scandies, all eyes will be on the Riksbank on Wednesday and Swedish inflation data on Friday. In Norway, the annual address by the central bank governor will be the main event.
Selected market news
Reflation trades were back in fashion late last week with equities and bond yields higher and USD stronger again. US equities finished at a new all-time high after trading sideways for a while and all Asian indices are up this morning. Risk sentiment got a lift from a change in tone from US president Donald Trump on foreign politics, lowering the immediate risk of a clash between the US and China or other trade partners. Trump’s telephone call with Chinese president Xi Jinping last week and his two-day summit with Japan’s Prime Minister Shinzo Abe points to a change in style on foreign politics following his very confrontational comments recently.
For now, this has lowered the risk of a foreign policy clash or trade war. We would warn against Trump given he has changed tack many times before, and given his very harsh criticism of China previously, it is probably still too early to call off the risk of a trade war. However, for now, it is clearly a positive development and has dampened one of the key risks this year.
Oil prices rose on Friday as OPEC achieved 90% compliance with its pledged oil cut. The news came from the International Energy Agency (IEA). Brent oil prices are back in the upper end of the past three months’ range between USD54 and USD57 per barrel.
In Japan, GDP for Q4 rose 1.0% q/q annualised, which was close to expectations of 1.1% q/q annualised.
No big news in the French election campaign. Polls still suggest Emmanuel Macron is currently the favourite to become the new French President. However, there is still a long way to go until the election in late April and many things could happen before then.