Market movers today

In the euro area, we get a first hint of where inflation is headed in June with the German and Spanish HICP figures out already today. It will be interesting to see if they point to the rise in core inflation we expect to see in tomorrow’s euro area figures. The EC’s economic confidence indicator for June will also be on the agenda, providing the last piece to the puzzle of how consumer and business sentiment has fared in Q2.

On an otherwise light day on the data front, markets will continue to look out for clues ahead of tomorrow’s G20 meeting in Japan. Tensions are high ahead of the meeting, with Trump warning of additional tariffs if there is lack of progress after G20, while it was also suggested that the US and China have agreed on a tentative truce, according to scmp .

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Norwegian retail sales figures for May and Swedish trade balance figures are due out.

Selected market news

Since the start of the week, global inflation expectations (measured by the 5y5y inflation swap) have declined gradually. Global central banks are now facing a situation where they need to deliver. In the case of the euro area, inflation expectations have gradually erased around half of the jump we saw last week after the Sintra conference. An ECB sources story yesterday suggested that the ECB is looking into the technical details of a potential restart of QE. The question is what, how and when the ECB would announce new policy measures and if this could bring growth and inflation higher. The global cyclical momentum will be conditioned on the result of the ongoing trade war (where the Trump-Xi meeting this weekend is focal) and the size of the stimuli of global central banks, such as the Fed and ECB. As we discussed in Danske Daily yesterday, some FOMC members suggested a 50bp cut would be overdone, which took its toll on markets yesterday. For the Fed, market pricing currently points to -72bp lower central bank pricing by the end of the year, while EONIA pricing (ECB) is -15bp lower by year-end.

The weekly US oil report showed a drop in the stock piles, which led to oil touching a four-week high. However, it fell back slightly after US President Trump warned of additional tariffs if there is lack of progress after this weekend’s expected Trump-Xi meeting at the G20 summit. According to the White House, the Trump-Xi meeting will take place on Saturday at 11:30 local time (3:30 CEST). Trump is also set to meet Russia’s Putin (Friday at 14:00 local time~6:00 CEST).

The Norwegian LFS-unemployment rate fell to 3.2 % in April, which was stronger than expected, but the details paint a broadly unchanged employment picture than the headline number suggests. The drop in the unemployment rate masks that employment was more or less unchanged, which leads us to conclude that the drop is more noise than a new trend. That said, we favour the less volatile NAV unemployment figure to gauge the labour market (which we expect to come in at 2.2%).

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