Market movers today
Today we get a lot of important numbers in Scandi, the US and Japan. Brexit will also draw attention with today’s vote at 15:30 CET on the withdrawal agreement without the political declaration. We expect the withdrawal agreement to be voted down again and the question remains; how does the EU react to this?
The US PCE headline and core inflation numbers for January are due today and we expect the core print at 0.2% m/m and unchanged at 1.9% y/y, just below the Fed’s 2% target.
In Norway, we also get labour market figures and we expect (seasonally adjusted) NAV unemployment for March to be unchanged at 2.3%. This report is more important than the LFS measure that disappointed on Wednesday. The day also brings Norwegian retail sales figures where we anticipate cautious growth of 0.3% m/m in February (see page 2 for more details).
Selected market news
Risk sentiment recovered somewhat overnight with Asian stocks trading up after a tough week. The US equity indices also gained yesterday, while the rally in fixed income markets halted. Yesterday, several Fed speakers sounded cautiously optimistic about the outlook, with St. Louis Fed President James Bullard, saying ‘it’s premature to consider a rate cut’, adding -much in line with our view – that he expects growth to pick up in the second quarter. In addition, New York Fed Chief John Williams was also modestly optimistic, saying that while growth is slowing, ‘right now the US economy overall is in a very good place’.
Trade talks between the US and China resumed yesterday. The US delegation led by finance minister Mnuchin and trade representative Lighthizer had a ‘productive’ dinner with the Chinese delegation ahead of a full day of talks today between the two sides. Meanwhile, Larry Kudlow, Trumps economic advisor, tempered expectations, saying the US is willing to extend the process for weeks or months in order to get the right deal for the US. We think that discussions are proceeding well, but that we may see hiccups on the final stretch of talks given the difficulties in finding an adequate enforcement mechanism in a potential deal. However, we expect the discussions to be completed before the end of Q2 ahead of the beginning of the US electoral campaign.
In Europe, financial markets yesterday digested the indications from the ECB that a tiered deposit system is under consideration. We provide a detailed discussions of the possible facility in our piece published yesterday: ECB Research – ECB Watchers conference: is a tiering system really the answer? Yesterday, German HICP inflation fell to 1.3% in March from 1.5% in February), driven by lower food and core inflation. In our view the numbers do not bode well for next week’s euro area core inflation release.
