Market movers today
Today is a very quiet day in terms of data releases. The most important release today is the Sentix investor confidence for March, which we estimate rose from 17.9 from 17.4 in February, as stock markets have been resilient to political uncertainty so far.
On Friday, the US jobs report for February is due. We estimate non-farm payrolls rose 190,000, that the unemployment rate was unchanged at 4.8% and growth in average hourly earnings rebounded to 2.8% y/y from 2.5%, which should be sufficient for the Fed to hike.
In the euro area, we expect the ECB to stick to its dovish communication at its meeting on Thursday. Although the ECB has hit its 2% inflation target, there are still no signs of an upward trend in underlying prices.
No market movers in the Scandis today but in Norway, keep an eye on the regional network survey tomorrow and inflation data for February on Friday.
Selected market news
On Friday, Fed Chair Janet Yellen confirmed that the Fed is set to hike at the upcoming meeting ending on 15 March, unless the jobs report for February due on Friday is extremely weak. As we estimate the jobs report for February to be good, we expect the Fed to deliver. Markets have priced in an 85% probability of a Fed hike at the upcoming meeting. We raise our forecast and now think the Fed will hike three times this year (March, July and December), as the Fed seems less worried about inflation and has increased its weight on labour market and growth data. We still expect three-four hikes next year and think the Fed will begin the reduction of its balance sheet in Q1 18. See also Flash Comment US: Yellen supports hike in March – we now expect a total of three hikes this year, 5 March.
The Chinese government has set its 2017 growth target of ‘around 6.5% or higher if possible’ (previously target was in the range 6.5-7.0%). We think growth will slow this year, as leading indicators point to moderation ahead in construction and infrastructure (the old growth engines).
Yesterday, French presidential candidate Francois Fillon said he will stay in the race, as ‘no one has the power to force him to step down’, see Bloomberg. Markets think the probability of a Fillon win is below 10%. The Republican party is to meet to discuss Fillon’s candidacy today. For economic and financial implications of a Marine Le Pen win.
On Saturday, US President Donald Trump tweeted that former President Obama wiretapped him during the election campaign, although without giving any evidence yet, see CNN. A source says that Trump’s claim is based on a story in Breibart News, a right-wing nationalist and conservative (also called ‘alt-right’) media. An Obama spokesman has said the claim is ‘simply false’ although wiretapping could have been initiated without his knowledge. The House and Senate intelligence committees are now looking into the accusation.
UK government lawyers have concluded that the UK is not obliged to either contribute to the EU bill or to pay a ‘divorce bill’ after Brexit, which is likely to complicate the Brexit negotiations, as the EU wants the UK to pay EUR60bn when it leaves.