Sat, Oct 23, 2021 @ 02:26 GMT
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EU Threatens Auto Retaliation

Market movers today

It is another quiet day on the economic release front, so financial markets will be looking to politics for action. One hot spot is certainly the Brexit negotiations, especially after seven labour members quit the party yesterday in protest against the party’s policies.

Trade discussions between China and the US continue to drive financial markets, with President Trump apparently considering a 60-day extension to allow completion of the talks without triggering a hike in tariffs at next week’s deadline.

In Sweden, the January CPIF print is due out and Riksbank Governor Stefan Ingves is due to speak at 12:30 CET on the economic situation.

Selected market news

Equity markets traded without direction and ended largely flat as US markets were closed yesterday due to President’s Day. The dollar index ended the day also largely unchanged, Treasury yields rose slightly and oil was up a notch.

Trade is or rather continues to be the talk of the town. A new round of US China trade talks commences in Washington today. The negotiations will be followed by high level talks later in the week. Markets have been upbeat concerning the negotiations due to signalling from Beijing and Washington rather than concrete measures. Both sides clearly want to strike a deal and difficulties revolve around establishing a monitoring mechanism to resolve concerns over copyright and other non-tariff issues.

The European Commission threatened retaliation should the US impose tariffs on automobile imports. The White House received a Commerce Department report on the national security implications of auto imports. The potential tariff threat comes after the European auto industry has just begun to recover from being hammered by new European emissions standards.

ECB Chief Economist Peter Praet struck a cautious tone on the economic outlook. Yesterday afternoon, he gave a first indication of what is likely to be expected this week as a number of important ECB speeches take place as well as the ECB minutes on Thursday.

He kept all options on the table – including the TLTRO – should there be a monetary policy case. Should the ECB decide to announce a new liquidity operation contrary to our base line, March seems too early based on Praet’s comments. Praet was also focused on the forward guidance, especially in the context of further asset purchases not being needed if they are clear on the forward guidance.

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