Market movers today

Today, focus turns to US PCE inflation, the Fed’s preferred measure on inflation. We expect core PCE inflation to stay unchanged at 1.8% y/y, close to the Fed’s inflation target of 2%. However, it is still below the peak in this cycle of 2.0% y/y, reached in July. The New York Fed’s John Williams is slated to appear on CNBC today at 10:00 ET.

US durable goods orders are set to attract attention, as this figure is a good indicator of US investment growth. After a steady increase throughout most of 2018, investment orders have levelled off in recent months.

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In emerging markets, we are due to get Polish retail sales and unemployment rate numbers. For more on emerging markets, see Emerging Markets Briefer – Buying opportunities set to arise after Q1 19, 19 December.

In Scandinavia, it is time for Swedish retail sales and Norwegian unemployment (see overleaf).

Selected market news

Asian stocks fell and Japanese equities decreased deeper into a bear market, with regional shares on course for the worst week since October. The downward move in Asian equities followed US equity markets, which had a tough session with the S&P 500 declining 1.5%, to 2467, its lowest close since late September 2017. The so-called market fear gauge, the VIX index, rose 2.8 points to 28.38, its highest closing level since early February. The negative sentiment follows a week when the Fed appeared more hawkish than the market had hoped for, holding on to further tightening of monetary policy despite the market volatility (for more details, see FOMC Review – Fed to markets: ‘Just a couple of more hikes ‘, 20 December).

The negative market sentiment was also prompted by renewed US-China tensions, which flared up after the US Justice Department filed charges overnight that alleged Chinese officials co-ordinated a decade-long espionage campaign to steal intellectual property and other data from dozens of companies. Treasury Secretary Steven Mnuchin said the indictments are a separate track from trade talks, which are scheduled to pick up again in January. However, China nevertheless demanded that the Justice Department withdrew the comments, highlighting the continuing tension between the world’s top two economies.

Meanwhile, the lower house of Congress passed funding for Donald Trump’s border wall. However, we expect the proposal to be rejected by the Senate before Friday’s midnight deadline, increasing the chance of a partial federal government shutdown.

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