Market movers today
Today’s highlight will be the ECB meeting which is set to focus on the strategic review and not on new policy messages, see ECB Preview – Time to reveal the scope, 17 January and our ECB strategic review “What, why, how? 10 critical questions for the strategic review. Media reported that ECB governing council members received documents concerning the strategic review, which will officially be launched today. Bloomberg reported yesterday that ECB will split the discussions in two parts (one on inflation and one on climate, communication etc). On the economic side we expect the ECB to confirm its easing bias and acknowledge its downside risk assessment, but also note the fading downside risks.
In Norway, we expect Norges Bank to leave its policy rate at 1.5% and reiterate that it will remain unchanged “in the coming period” at its rate-setting meeting on Thursday. This is one of the bank’s “interim” meetings, with no new monetary policy report or press conference, and historically the threshold for any new signals at such meetings has been relatively high.
On the data front we get US jobless claims as well as unemployment data in both Norway and Sweden. The euro area also releases consumer confidence in the afternoon.
Finally, there may still be some focus on the coronavirus in China depending on how fast it is spreading. However, we may not know for sure until we get on the other side of the Chinese New Year holiday next week, where hundreds of millions are set to travel in trains and airplanes raising the risk of the virus spreading.
Selected market news
The political uncertainty in Italy is again back on the agenda after the head of the 5SM DeMaio resigned yesterday. This has raised speculations of a snap election in Italy. However, the 5SM does not have a strong position in the polls relative to e.g. Salvinis Lega Nord, and would most likely try to avoid an election. However, it increase the focus on the outcome of the two regional elections on Sunday to get a gauge of the support for the 5SM. The turmoil in Italian politics had a negative impact on Italian government bonds yesterday, which ended up underperforming peers modestly, but it was a volatile day for Italian government bonds.
Asian equity markets declined this morning on the back of the virus outbreak in the Wuhan, while 10Y Treasuries declined 2bp in Tokyo trading. The Chinese is trying to contain the virus by restricting travelling in and out of Wuhan.
