Market movers today
After a data-thin start of the week, there will be several important data releases today, which could affect markets’ expectations about global monetary policy steps. This morning France and Sweden are set to release Q2 19 preliminary GDP growth. The French economy probably held up well in Q2 19, leaning on improved consumers’ purchasing power and supported by the stimulus package.
In Sweden, we expect GDP to shrink 0.2% q/q versus the previous expansion of 0.6% q/q and versus Bloomberg consensus median of 0.3% q/q growth. On an annual basis, we expect Sweden to grow 1.4% y/y versus 2.1% y/y expansion in Q1 19.
In Norway, we expect retail sales to rebound 0.6% m/m. Retail sales has been a weak spot for some time in Norway and a rebound would confirm the improved purchasing power stemming from higher employment, rising nominal wage growth and lower electricity prices.
Germany’s preliminary inflation figures for July are likely to show a marginal deceleration on an annual basis from the previous month as fuel prices headed down. The figures will give a first clue where euro area core inflation is heading in July (out tomorrow). With energy prices and core inflation decelerating slightly, we expect German HICP inflation to fall back in July from June’s 1.5%.
The European Sentiment Indicator (ESI) will provide the last piece of the puzzle in terms of European business surveys in July. With PMI, Ifo and ZEW all telling a story of a deepening manufacturing downturn at the start of Q3, we would be surprised to see a different message emerging from today’s ESI reading.
Today’s bunch of data from the US ahead of tomorrow’s FOMC meeting includes consumer confidence for July, personal consumption growth, (core) PCE deflator and income figures for June and home-price dynamics for May. Consumer confidence has likely improved on positive labour market dynamics in June, but the personal consumption expenditure deflator, which is closely followed by the Fed, has probably slid slightly on a monthly basis, while expanding on an annual basis.
Selected market news
Asian stocks are heading up this morning, as the Bank of Japan kept its QE with yield curve control unchanged as expected at a meeting ending this morning with a 7-2 vote. There was speculation as to whether forward guidance would be extended further into 2020, but this was left unchanged too. Bank of Japan kept its assessment of the economy stating that ‘Japan’s economy is likely to continue on a moderate expanding trend’ but it notes overseas risk. The forecast for inflation in FY2019 and FY2020 is now 1.0% and 1.3% respectively (including VAT-hike effects). Since the last projections in April, inflation has headed south again, especially due to the lower oil price. Thus, Bank of Japan remains in wait-and-see mode. As long as weak foreign demand is not spilling over to the domestic economy and USD/JPY keeps a safe distance to 100, Bank of Japan is likely to stay there.
