Market movers today
Today’s calendar is a blend of politics and data. First, the German Ifo will be closely monitored. Both the expectations and current situation components have been on a falling trend for the past year and we are very interested to see if it will follow the more upbeat Zew expectations from last week or reflect the weak PMIs we saw yesterday.
In Sweden, the Parliamentary Committee on Finance will hold an open hearing on the current monetary policy at 09.30 CEST. Governor Stefan Ingves and Deputy Governor Per Jansson will participate.
In the UK, the Supreme Court is expected to rule on Prime Minister Boris Johnson’s suspension of Parliament at 11.30 CEST.
The Hungarian central bank (the MNB) will hold its monetary policy meeting. In line with Bloomberg and Reuters consensus, we expect the key rate to remain unchanged at 0.90%. As the ECB has prolonged its dovishness, Hungarian inflation continues to decelerate and business confidence has slid dramatically, we expect the MNB will be dovish again, adding pressure on the HUF in the short and mid-term.
Selected market news
Asian equity markets and US stock futures have remained in green territory, while shares climbed in Japan, where markets opened after a holiday. Previously, US stocks struggled to rise, ending slightly in the red, while oil and gold slid after Reuters reported that Saudi Arabia had restored more than 75% of the crude output lost after the recent attacks and could return to full volumes by early next week. However, the Wall Street Journal reported that repairs at the plants could take months longer.
The recent Middle East saga suddenly got more of a European flavour as Britain, France and Germany joined the US in accusing Iran of an attack on Saudi oil production. The European countries urged Iran to agree to new nuclear and missile talks. However, Tehran ruled out the possibility of negotiating a new deal, stating that the European powers had failed to fulfil the agreement under the 2015 nuclear pact.
Yesterday, preliminary PMIs from Europe surprised negatively as German manufacturing and services PMI headed lower and manufacturing PMI hit its lowest level since 2009. In manufacturing, the picture is still one of a weakening order situation and deteriorating employment expectations. Probably more worrying is that the services sector is feeling the pinch as well, with incoming new business falling into contractionary territory for the first time since December 2014.
ECB President Draghi’s hearing at the European Parliament did not reveal any new monetary policy directions. Draghi defended the September package, while also continuing to show trust in the Phillips curve, repeating the potential for further cuts if needed. Finally, he also mentioned that new ideas such as MMT (Modern Monetary Theory) could be discussed among the Governing Council, although is in no rush towards this.
