Market movers today
Swedish January CPI figures tick in this morning. We expect a slight increase in core inflation to 1.8% (see page 2 for more details).
We also get January CPI figures from the UK. Even though inflation is below the 2% target, Bank of England is more focused on growth these days.
The Central Bank of Turkey is set to announce its rate decision.
FOMC minutes are due for release and we have a lot of FOMC members out speaking as well. So far the Fed is monitoring, not reacting to, the coronavirus and the economic risks stemming from it.
Selected market news
After the Apple earnings scare shook equity markets yesterday, Asian equity markets are moving higher this morning. Risk sentiment appears to be boosted by news that China is planning further measures to support the economy, this time to inject liquidity into and help merge the nation’s airlines. This support comes after the Chinese central bank cut its medium-term policy rate two days ago.
Meanwhile, we are now moving into a period where economic releases will start to give a gauge of the impact of the coronavirus on economic activity. Yesterday the German ZEW index for February was the first data reading post the coronavirus hit. As expected a setback was visible in both the current assessment and expectation indices, falling to 8.7 and -15.7 respectively (a bit more than consensus). Still, the declines were relatively small in scale for now, as both the euro area and Germany remained in the upswing quadrant. In the case of Germany the ZEW expectations-current condition spread remained positive. The latter might give a hint that the expected fall in Friday’s PMIs could also be fairly contained for now (we look for 47.4 for euro manufacturing PMI). Not least as the underlying macroeconomic momentum remained quite strong, as signalled by our forward-looking macroeconomic model Macroscope, which we published yesterday (see MacroScope: Global cycle rebound strengthening ahead of coronavirus hit ). That said, the risk of a bigger hit in future months lingers as long as the economic shutdown in China continues.
On the US side, the empire state manufacturing sector survey was stronger than expected, moving to the highest level since spring last year, before the US escalated the trade war. The relative upbeat US data compared with the German ZEW release prompted a further downward move in the EUR/USD, breaking below the 1.08 level (see the FX section on page 2 for further discussion).
If markets were looking for aid to the European economy from the fiscal side, yesterday’s agreement by euro finance ministers was disappointing, as they stressed rather expectedly that a fiscal boost would only come if growth deteriorates. The market reaction in European fixed income was also rather muted as no additional debt funding is in the pipeline.
