Market movers today
The US CPI data for December is unlikely to rock the boat, as the growth outlook has been more important to the Federal Reserve for some time now with core inflation definitely not spinning out of control. Inflation may return to the spotlight at a later stage, as the Fed struggles to live up to the 2% inflation mandate when looking at PCE core inflation. We expect CPI core inflation to rise 2.3% y/y in line with consensus.
In our own backyard, we have some Swedish data due out today. The Swedish PES unemployment rate showed a rise to 4.0% in December from 3.9%. Household consumption in November is due out at 09:30 CET. For more details see overleaf.
In the US, the NFIB small business optimism index has rebounded and remains high. There has been a divergence in business confidence between small and large companies. This makes sense, as smaller companies have been less exposed to slower global growth and trade war risks. We think the small business optimism index will remain upbeat.
In the afternoon, we have a few speeches from Fed and ECB policymakers.
Selected market news
Stock markets rallied last night as the US moved to drop the designation of China as a currency manipulator only two days before the phase-one trade deal is set to be signed. The Chinese delegation arrived yesterday led by Vice Premier Liu He and the signing is expected to take place in a meeting with US President Donald Trump in the White House tomorrow.
SP500 rallied throughout the session and finished at a new all-time high . The Chinese currency added to recent strong gains overnight as USD/CNY dived below 6.88, down from a peak of 7.18 only four months ago. For more on recent CNY developments see China Weekly Letter – Recovery, stimulus and signs of new reform push , 10 January.
Adding to the positive sentiment, Chinese exports data surprised to the upside overnight posting an increase of 7.9% y/y in December from -1.3% y/y in November. Imports saw an even sharper turnaround rising 16.3% y/y in December from 0.8% in November. The actual numbers should be taken with a pinch of salt as the data are very volatile. However, looking at the underlying trend also points to some rebound in trade and gives further validation to other indications of a moderate economic recovery in China.
The oil price continued lower yesterday as things calm down in the US-Iran conflict, while metals prices rallied further on the Chinese recovery signals.
