Market movers today
The ongoing ‘ Fed Listens’ conference remains the centre of attention, with any interviews/speeches scrutinised for policy hints following the recent days’ remarks, see below.
Otherwise, the market is primarily awaiting the ECB meeting tomorrow and the US labour market report on Friday. Today’s ADP report could give an indication of what to expect on the latter even if the predictive power has been mediocre recently. We also get US ISM non-manufacturing, which will receive more attention than usual given the disappointing US flash Markit Service PMI two weeks ago – we get the final Markit print 15 minutes prior to the ISM today. A series of Markit Service PMIs will also be released across Europe.
The weekly US crude inventory report could prove interesting in the current weak macro environment and in light of the recent oil sell-off. The story since mid-April has been a rise in US crude stocks, which has raised concerns about weakening US demand.
In the Scandies, focus turns to the general election in Denmark and Real Estate Norway house prices in Norway . Neither of these should trigger any significant market reaction. For more information, see the Scandi section on page 2 in the report.
Selected market news
This morning, most Asian equity indices are trading in green following yesterday’s equity rally driven by Fed Chair Powell (see below) and encouraging remarks on both Mexican and Chinese trade negotiations. US market inflation expectations have rebounded from their lowest levels since January while US 10Y treasury yields have moved above 2.10% again. USD FX moved modestly lower overnight while both oil and gold are little changed.
At the ‘Fed Listens’ conference, Fed Chair Powell showed a willingness to cut interest rates. He initiated his opening speech with an odd one out paragraph on the current policy situation, on which he stated the Fed “will act as appropriate to sustain the expansion” amid “trade negotiations and other matters” . In our view, this supports our call for a rate cut signal at the June FOMC meeting and a subsequent rate cut at the July or September meeting, see here .
The big question now is whether the ECB will also make a new dovish turn tomorrow. In that respect, remember the ECB is already on an ‘easing bias’ but inflation markets are clearly doubting the ECB’s ability to react. This was illustrated yesterday following Euro area inflation that came in on the low side with 5y5y Euro area inflation expectations dropping close to a historical low, see chart . For more, see our ECB cheat sheet here and our ECB preview here .
FX reserves data in Denmark published yesterday showed that Danmarks Nationalbank (DN) opted to see through the rise in EUR/DKK to the highest level this year. In our view, it signals patience from DN with respect to the weak DKK.