Market movers today
In the euro area we look forward to some interesting data releases with both Q4 GDP and preliminary January HICP figures out today. While leading indicators have pointed to some rays of light lately, industry has likely remained in recession in Q4 and hence we look for continued muted growth of 0.2% q/q in Q4. More upbeat is the outlook on the inflation front, where we expect another increase in HICP inflation to 1.4% in January. That said, the increase will mainly be driven by a rebound in energy and food prices, while we expect core inflation to fall back to 1.2%.
The UK is set to leave the EU officially at midnight, more than three years after the Brexit vote.
In Norway, the January unemployment numbers will be in focus today.
Selected market news
The World Health Organisation declared the coronavirus outbreak a global health emergency yesterday. The number of confirmed cases has risen above 9,800 and the total death toll has reached 213. The US and Japan have raised their travel warning to China, while the US reported its first case of human-to-human transmission. Russia has closed its land border with China to travellers. More Chinese cities and provinces have further extended the holiday until at least 10 February. Finally, OPEC+ is considering bringing forward its next meeting to February to discuss further output cuts to curb effect on prices from the drop in demand due to the coronavirus.
China’s manufacturing PMI dropped to 50 from 50.2 in January and the non-manufacturing PMI rose to 54.1 from 53.5. However, the market is likely to see through these numbers as the next round of economic key figures out of China is likely to show significant deterioration on the back of the economic ramifications of the coronavirus outbreak. Chinese GDP growth could lose 1% or more in Q1 depending on the duration of the coronavirus lock-down.
Against our expectation of a rate cut, the Bank of England announced the Bank Rate remains unchanged at 0.75% (vote count 7-2 unchanged). As investors thought yesterday’s decision was a coin toss, we saw a move lower in EUR/GBP from 0.848 to 0.841, so still above 0.84 as expected. At the press conference, BoE governor Mark Carney explained that the BoE thinks the UK recovery remains on track, highlighting the sharp rebound in the post-election indicators for January released so far – see Bank of England review, 30 January.
