Market movers today
Final euro area GDP figures are due today, providing insights into the composition of Q1 growth, which accelerated to 0.5% q/q. It will be particularly interesting to see whether the expected pickup in investments and slowing of private consumption growth is confirmed by the data. In 2017, we still expect solid GDP growth of 1.7% in the euro area. Today also brings German factory orders for April. Following two months of increases, we expect a decline in factory orders of about 0.7% for April.
In China, FX reserve data is released. We expect FX reserves in May to increase due to valuation as the USD weakened significantly and thus increased the USD value of euro reserves for example and as out flows have stopped following the tightening measures of the government . The Polish central bank holds its monetary policy meeting today, but we expect the bank to keep its policy rate unchanged at 1.5%.
In the Scandi countries, the focus today is one the industrial production data in Denmark and not least Sweden. Given the weaker-than-expected exports and production numbers in the latest Swedish Q1 GDP data, it will be interesting to see how Q2 starts out . In Denmark, bankruptcies and repossessions for May are also released, see next page.
Selected market news
Risk sentiment has remained sour ahead of ‘Super Thursday’ with most major equity indices in the ‘red’ this morning while the traditional safe havens have rallied. 10Y US treasuries have benefited from the global environment , which alongside stories of increased future Chinese demand have pushed the 10Y US yield to the lowest level since the US presidential election. Apart from the ECB meeting and the UK parliamentary election, Thursday will also bring former FBI Director James Comey testifying to Congress. The testimony will be followed closely by markets as new information could affect the policy agenda of the Trump administ ration. Yesterday, equities temporary halted losses on the story that Comey will presumably stop short of giving his own view on whether Trump obst ructed a federal probe.
Over the past few days, Trump’s personal twitter account has been subject to several controversial tweets on the travel ban, a confrontation with the London Mayor and the Qatar diplomatic crisis in the Middle East . In relation to Comey’s testimony, according to White House sources Trump will stand ready to live-comment ‘if he feels the need to respond’.
In Norway, the monthly house price statistics from Real Estate Norway revealed the lowest May house price growth in 14 years (-0.7% m/m). The cooling housing market reflects not least a more balanced demand-supply side and tighter regulatory measures introduced at New Year. The release brought the yearly national growth rate to 8.3%, which is almost 2.5pp below Norges Bank’s own forecast from t he last monet ary policy report. Meanwhile, we do not see this as an argument for an out right lower rate path at the forthcoming monetary policy meeting; rather it reduces the upside pressure on rates. However, it does remove an ‘obstacle’ for turning more dovish at a later stage if inflation were to disappoint strongly (not our base case).
