Market movers today
Key focus in Scandi will be on the Riksbank meeting. We do not expect the Riksbank to make any changes to the repo rate or the repo rate path but would not be surprised to see a softer tone. This is priced in by markets already, however, as SEK has weakened significantly recently (more on page 2).
On the global scene, we will have a number of important releases. In Europe, the UK January CPI and euro area industrial production are due. Especially the industrial production will be interesting as to what extent the end of 2018 was particularly weak.
US CPI for January is due out this afternoon. We estimate CPI core rose +0.2% m/m in January, implying a core inflation rate at 2.1% y/y down from 2.2% in December.
Overnight, first Japan GDP figures for Q4 are due out as well as the Chinese trade balance.
Selected market news
Stock markets continued to rally overnight in Asia. The gains are driven by rising optimism that the US and China will strike a trade deal fairly soon and that it will drive a recovery in the global economy.
US President Donald Trump indicated he could let the ceasefire deadline of 1 March slide a little if a real trade deal with China was close. He also stated that he expects to meet with Chinese President Xi Jinping to close the deal at some point.
Trump also played down the risk of another government shutdown. He indicated in a tweet that he would instead get money from other sources for border protection saying he ‘will get almost USD23BILLION for border security’ without stating which sources it would be.
Yesterday, we saw a number of ECB speakers on the wires. Most important was Philip Lane (incoming ECB board member set to replace Chief Economist Peter Praet). Lane stressed that the euro area economy was ‘pretty strong’ and suggested that the setback was temporary.
Furthermore, Bundesbank President Jens Weidmann suggested that there were good reasons to believe inflation would return to target and that current data was a ‘soft patch’. Klaas Knot said that ‘wait and see’ was probably the best approach now. Importantly, it was mentioned that we should not focus on individual data points. These messages suggest an unchanged ECB narrative despite the ECB being set to lower its GDP staff projections at the March meeting. However, uncertainty prevails as the full set of incoming information since the last meeting has not been released yet.
