Market movers today
We face the quietest day on the data calendar this week as focus turns to eurozone investor confidence, eurozone goods consumption and Scandinavian house prices.
In the euro area, Sentix investor confidence, retail sales and ECB QE details are due for release today. Sentix has climbed to levels not seen since 2007 with a figure of 27.4 in May and we expectit to rise further to 28.1 in June. We estimate retail sales will show another monthly increase of 0.3% in April, as consumer confidence rose in April and Easter is likely to have supported higher retail sales. Finally, the ECB is due to release the monthly QE details, which will not least at t ract at tention in Fixed Income markets (see page 2).
In Scandinavia, focus will be on house price statistics for Denmark and not least Norway. In Norway, Real Estate Norway’s release may well show the first fall m/m since February last year. The combination of more restrictive bank lending practices and an increased supply of properties has brought a better balance in the housing market , including in Oslo. From a policy perspective, however, itis important to remember th at Norges Bank anticipated a stabilisation in housing prices back in March, so a slight correction will primarily ease upward pressure on interest rates rather than add a downward pressure.
Selected market news
Market sentiment has suffered somewhat at the beginning of the week with most major equities indices trading in red territory as we approach the key session on Thursday, with not least the ECB meeting, the UK parliamentary election and James Comey testifying to Congress. Also, the oil price has erased its gains following the diplomatic crisis in the Middle East between Qatar and a coalition led by Saudi Arabia accusing Doha of supporting terrorism.
Yesterday’s economic data releases out of the US generally disappointed market expectations with the final estimates for Service PMIs and durable goods being revised lower. While the first release of the May ISM non-manufacturing still points to a healthy expansion, the release did disappoint slightly at 56.9 (consensus 57.1, previous 57.5). Also, the details revealed a deterioration in new orders. Meanwhile, the employment component reached a new high but ‘prices paid’ dropped to a sub-50 level, indicating prices fell for the first time in 13 months.
In the UK, May Service PMIs disappointed market expectations. On the slowdown in the new order book, respondents not least referred to uncertainties ahead of the Parliamentary election and general economic uncertainty. This underpins the importance of Thursday’s parliamentary election where polls pointed recent ly to a much tighter race than expected previously. We do, however, stress thatin general one should be careful not to rely too much on the UK polls. First, polls did not foresee the absolute majority win for the Conservatives in the latest general election in May 2015. Moreover, it is difficult to predict the distribution of seats among the political parties because of the ‘first -past -the-post ‘ system. Irrespective, markets and not least the GBP will continue to react to new polls as we approach Thursday.
As expected, the Reserve Bank of Australia this morning kept policy rates unchanged. The released statement had few changed but was on some points somewhat more upbeat on the domestic out look. AUD/USD is t rading a little higher following the announcement.
