Market movers today
The key focus today is the G20 summit starting in Osaka. Although the long-awaited meeting between US President Trump and Chinese President Xi is only scheduled for tomorrow (3:30 CEST), headlines surrounding the summit, especially on the topic of trade and military tensions with Iran will drive sentiment today. The odds have been rising for a ceasefire in the trade war after Trump reached out to Xi last week, but the risk of Trump increasing tariffs if the summit does not bring any progress still haunts.
On the data front, the most important release today is the June euro area HICP print. In May, core and headline inflation disappointed markets. For the June print, we expect euro inflation to continue its roller-coaster ride, as base effects remain in the driver’s seat and we look for core inflation to jump back to 1.2% (see more in EUR inflation roller-coaster continues , 18 June).
Inflation figures will also be in focus across the Atlantic with the PCE core print for May. The Fed lowered its inflation forecast significantly at the latest meeting and low inflation is one reason it has become even more dovish.
In Scandinavia, we get Swedish wage growth and retail sales figures, while in Norway employment data is in focus (see next page).
Selected market news
The talk of the town continues to be the G20 meeting starting today, with the highlight being the 90-minute lunch meeting tomorrow between Trump and Xi. It’s a high-stake and much-awaited meeting and the outcome will give an indication of how risk will fare in the near future. Yesterday, the WSJ reported that China will insist on the US lifting the Huawei ban as part of a trade truce. Further, the report suggested that China could be ready to put restrictions on rare earth exports to the US unless the ban is lifted. That would be a way to retaliate against the US for the attack on Chinese tech. China has not yet retaliated but may have chosen to wait for the G20 to see if Xi could get Trump to lift the ban first. See also China Weekly Letter: Rising chance of ceasefire at G20 meeting , 21 June.
The Swedish May trade balance showing a SEK8.3bn surplus was very strong. Export growth remained strong at 10.3 % y/y, but an important reason for the strong figure is also that imports fell, -1.7 % y/y. The trade balance is partially strong for the wrong reasons.
Euro area data yesterday was mixed. The Spanish inflation figure was slightly on the low side at 0.6% vs. 0.9% in May while German HICP was in line with expectations at 1.3%, which led us to revise down our expectations for today’s euro area figure. The European sentiment indicator showed a further dip in June across sectors (though consumer and service confidence remained relatively stable).
As Q2 is coming to an end, we published a piece on the Euro area – Catching up with reality , where we conclude that investors should brace for more negative economic surprises in the coming weeks. We expect GDP growth in Q2 to fall back to 0.2% q/q.