Market movers today
This morning, we have published our updated economic outlook for the Nordic countries, the Nordic Outlook, which highlights local strengths amid global risks.
In the US, the payrolls report is due and we expect a rebound to 190,000 new jobs in December. But it is average hourly earnings that are key: we think this rose 0.25% m/m in December, which means a fall in the annual growth rate to 2.9% y/y from 3.1%.
In the euro area, flash HICP figures for December are due: we expect the headline figure to decline to 1.9% but with downside risk to this estimate, and we see core inflation jumping back to 1.1%, driven by higher services prices during the holiday season.
In the UK, the PMI services is expected to increase a tad from the previous 50.4 reading.
Fed chair Powell is set to join predecessors Yellen and Bernanke for a panel discussion at the American Economic Association annual meeting; this could make for some broader reflections on monetary and notably Fed policy more specifically. Yesterday, the Fed’s Kaplan indicated openness to an earlier end to and/or slower balance sheet run-off.
In Norway, the monthly house price report is due to be released today, see page 2.
Selected market news
A significant drop in the US manufacturing ISM yesterday extended the risk-off move initiated on Wednesday by Apple’s after-market revenue warning and the ‘flash crash’ in the JPY. The overall ISM manufacturing index saw a large drop to 54.1 (expected 57.5) from 59.3 previously, led especially by a sharp decrease in new orders. The report could deal another blow to President Trump in the trade dispute in suggesting that US businesses look increasingly to have been impaired by it. Notably, the ISM employment index also dropped somewhat, but at 56.2 it remains rather high, and, separately, yesterday’s ADP report alluded to still healthy job gains in the US ahead of payrolls today.
US equities were left in the ‘red’ with the main indices down 2.5-3.0% as yesterday’s Apple warning took hold; Asia mixed with Japanese indices also markedly down following yesterday’s JPY strength, while their Chinese counterparts fared much better, posting outright gains after China’s Caixin services PMI rose to 53.9 (expected 53.0). JPY crosses stabilised after Thursday’s ‘flash crash’, with the USD/JPY rising a little further to now trade above the 108 mark. US Treasuries remained supported and the 10Y yield briefly dipped below the 2.55% mark. Oil prices rose to USD56/bbl (Brent crude), while gold continues its uptick with USD1,300/tr oz now in sight. More broadly, central bank tightening continues to be pushed out in time, with markets now clearly betting central banks will have to rein in tightening: futures markets thus see the Fed as done hiking with a full 25bp cut now priced for H1 next year; similarly, a first 20bp ECB hike is now put no earlier than Q4 next year. While we look for Q1 to be challenging cyclically and risk-wise, we stress that Chinese easing and an eventual trade deal should help foster a global cyclical turn during H1
