Market movers today
After a hectic day yesterday, today is quieter in terms of data releases.
This morning in the Scandi space we will get Norwegian industrial confidence in Q4 and Swedish retail sales in December.
The German IFO survey for January is also due out, where we see further downside risks. Also, the ECB’s Survey of Professional Forecasters is also due out.
Selected market news
Yesterday, markets had a volatile session on the back of the ECB, trade war comments, PMIs etc. Equity markets rose marginally across most jurisdictions while, core bond market yields declined. EURUSD ended the day lower. Overnight, equity markets in Asia are in the green at the time of writing.
At the ECB meeting yesterday, it changed its growth risk assessment in light of continued weaker incoming data and persistent global uncertainties. This has been long overdue in our view and with January PMIs (see below) a balanced risk assessment would clearly have challenged the ECB’s claim of being data-dependent. We still expect ECB hiking rates this year in December as Draghi was upbeat on the labour market and wage dynamics. We lower our expectation for a liquidity operation in March after the meeting yesterday to 75-80% for an announcement in March.
Norges Bank (NB) left the sight deposit rate unchanged at 0.75%, in a decision widely expected by both markets and analysts. This was a ‘small’ meeting, including only a press release and the one-page ‘Executive Board’s assessment’, i.e. there was no monetary policy report, no revised rate path and no press conference. This, alongside the central bank having only one month’s worth of data and economic developments to digest, limited how big a change in the policy outlook the central bank could signal. NB clearly clarified that markets should expect a rate hike in March. Our call remains for two rate hikes in 2019 (March and September) but, notably, we see the balance of risk skewed towards three and not one rate hike. We also pencil in two rate hikes for 2020 and 2021.
Swedish unemployment (seasonally adjusted) bounced higher to 6.4% in December, more or less as we expected, while the trend adjusted number stayed flat at 6.2%. Employment growth was still solid at +100k. In all, a fairly strong report, although our impression is that unemployment may be starting to find a bottom.
January euro area PMI fell further in line with our expectation to 50.7. Yesterday’s PMI readings signal the euro area economy edging closer to stagnation at the start of 2019 (pointing to just 0.1% q/q growth in Q1), which is in line with that latest signals from Macroscope . Yesterday, Handelsblatt reported that the German government revised down its growth expectations for this year to 1% from 1.8%, which is a sizable cut given the new risk assessment from the ECB.
