Market movers today
Focus this morning will be on the market reaction to the US killing of a leading Iranian commander , which has sent oil prices higher. In an airstrike at Bagdad airport in Iraq, the US took out the Iranian head of the elite Quds force and spearhead of Iran’s rising military influence in the Middle East. The price of Brent oil has jumped UD2½ from USD66 per barrel to USD68.5 per barrel, as the attack could risk escalating the US-Iran conflict and proxy war activities in Iraq. In a comment to the attack, Iran’s foreign minister Mohammad Javad Zarif called the assassination “an extremely dangerous and foolish escalation” and Iran’s Ayatollah Ali Khamanei warned of “severe retaliation”.
On the data front, the US ISM manufacturing index for December will be today’s highlight. The ISM index has fallen to lower levels than other US surveys and has not yet shown the signs of a recovery that we see in business surveys globally. Hence, we see some upside risk to today’s number where consensus looks for a rise from 48.1 to 49.9.
Tonight, the minutes from the December FOMC meeting will be released. At the meeting, the Fed sent a signal of being firmly on hold with 13 out of 17 members expecting no rate changes in 2020 while three members projected one hike.
In Scandi, Norway releases the LFS unemployment rate, which we expect to be unchanged at 3.9%.
We expect to see slower growth across the Nordics this year, with Sweden being worst off and Norway the best performer. All Nordic countries are affected by the global slowdown, but Swedish growth is also dragged down by weak domestic demand, while Norway continues to be supported by growing oil investments. Growth in Denmark and Finland has to some extend been supported by temporary factors and we expect them to look more like the rest of Europe this year.
Selected market news
Stock markets and bond yields are lower, as risk appetite took a hit from the US attack on a high-level Iranian commander. USD/JPY added to the decline seen yesterday. Markets will await a possible response from Iran with fears rising of a tit-for-tat escalation of the US-Iran conflict.
Final Euro area PMI manufacturing for December was revised slightly higher yesterday from 45.9 to 46.3. While the revision was positive, the overall level is still very low and paints a picture of a fragile economy. However, with the recent improvement in China and Asia as a whole, we should expect some lift to PMIs over the coming 3-6 months. US Markit PMI for December was revised slightly lower to 52.4 from 52.5 but is still off the lows seen in August last year of 50.3.
