Market movers today
Trade tensions between the US and China continue to be the key driver for markets (more in selected news).
On the data front, the main releases will be US retail sales for April and the US Empire business survey index for May. We expect retail sales to continue to show strength but would keep in mind the data is quite volatile on a monthly basis. Retail sales bounced back strongly in March after a weak start to the year. The Empire index will give us the first survey for May. We also get the first estimate of German GDP growth in Q1. We expect 0.4% q/q
In Scandi, we have Swedish inflation expectations from Prospera and Norwegian trade balance figures.
Selected market news
Things have calmed down a bit on the surface between the US and China on the trade war with no new issues to fuel the fire yesterday. Trump tweeted yesterday: “When the time is right we will make a deal with China”. After adding that this must be a great deal for the US, he says: “It will happen, and much faster than people think!”. It still seems every time stock markets are down, he starts tweeting about a deal coming. However, the nationalistic sentiment is growing on both sides and that could make it even harder to get a deal done. One of the key challenges regards China’s willingness to change its laws, which is apparently a red line for China. But also one of the key requirements from the US. Will Trump be willing to sacrifice this demand? The next thing to look out for is whether a new round of talks is announced at some point or a potential phone call between Xi and Trump. Both might dampen the fears for a while. However, new talks are no guarantee of a deal and we see it as increasingly likely that it will take more financial stress for the two sides to feel enough pressure to find a compromise. This could easily drag into H2, see also US-China Trade: Back in the tit-for-tat spiral , 13 March 2019.
As a result, risk sentiment was holding up yesterday, sending equities higher by around 0.8% in the US and slightly more in Europe. This comes after the dreadful day on Monday with equities down markedly.
Adding to the risk factors, note also that by Saturday, 18 May, Trump has to decide on the potential of tariffs on European vehicles. While we do not expect Trump to go ahead with the tariffs, we should keep an eye on a potential new risk factors for the European/global economy. Should he go ahead, the tariffs must either be implemented within 15 days or he can delay implementation by 180 days if negotiations with the EU start (the latter may be more likely).
