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Trade Talks Temain Centre Stage

Market movers today

There are no significant economic releases today, so focus will be on political events , and most notably the signals from the US and Chinese sides in the ongoing trade talks ahead of the end-February deadline. The trade talks are set to continue in Washington this week. Also in focus will be the political fall-out from Trump’s decision to declare national emergency in order to find funding for his border wall to Mexico. Note that it is the President’s Day holiday in the US today and hence US markets will be closed.

Brexit negotiations between the UK and EU will continue to attract headlines as we approach end-February, where a new House of Commons vote is set to take place.

In the Scandies, today will bring the preliminary labour market report from the Technical Calculation Committee and Swedish house prices, see Scandi page 2.

Later this week we will have more comments from central bankers on the growth and monetary policy outlook. A number of Fed officials will speak this week as well as both ECB’s Draghi and Praet. Furthermore, a broad set of Markit PMIs alongside FOMC and ECB minutes will be released. See the Weekly Focus here.

Selected market news

Global equity markets are off to a strong start this morning with most Asian and Pacific equity indices trading in ‘green’ on the back of Friday’s US rally and optimistic comments from the high-level US/China trade negotiations that ended in Beijing last week. China Central Television reported that the two parties had reached consensus in principle on key topics while a White House statement said the discussions “led to progress between the two parties” even if “much work remains”. This week the negotiations continue in Washington.

In the US, the Commerce Department has submitted its long awaited report on the national security implications of auto tariffs to the White House. Meanwhile, the content of the report was not made public. Trump has 90 days to decide on whether to act on the recommendations which could include raising import tariffs on fully assembled vehicles.

On Friday, markets reacted to news headlines from ECB’s Benoir Coueré on possible TLTROs. Meanwhile, according to our ECB economist Piet Christiansen, the headlines did not do justice as to what was actually said. Coueré said: “There is a big discussion in the market of having a new TLTRO. It is possible, we are discussing it, but we want to make sure that it serves a monetary policy purpose, so it has to be useful to maintain credit conditions, support credit in the eurozone where credit is needed. If we are convinced we will do it “. He also stated the net stable funding ratio (NSFR) is not a monetary policy argument. Hence, Piet’s take was that nothing new was said relative to previous Draghi comments and we stick to our non-consensus view that no TLTRO will be announced in March, see ECB Research: TLTRO – no longer our base case , 9 February.

As expected, a general election has been called in Spain as a result of the rejection of the national budget last week. The election date is set for 28 April and will mark the third general election in less than four years. However, we are not overly concerned about the political situation in Spain. The leading centre-right wing coalition members are all fairly pro-EU and a change of government would be seen as market friendly.

Danske Bank
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