Market movers today
The ECB minutes are due for release today. The January meeting was quite uneventful, but focus will be on the finer details and discussions about the strategy review and GC members’ views on this (scope, timing etc.).
In Norway, the Q1 oil investment survey is published. This will provide a first estimate of investment on the Norwegian continental shelf in 2021 (see page 2 for more details).
In the UK, retail sales from January tick in. It will be interesting to see if the December weakness continued.
In light of the solid Empire index, the question is if the Philly Fed index published today shows up strong as well.
Selected market news
Asian equity markets are a bit under pressure this morning as the coronavirus has claimed two deaths in Japan (on a quarantined cruise ship) and cases in South Korea more than doubled to 82.
In Sweden, the January inflation was surprisingly low at 1.2%, coming in 0.3pp below the Riksbank’s already sharply reduced projections of 1.5%. The CPIF excl. energy was 1.6% versus the Riksbank’s projection of 1.9% y/y. Due to some technical adjustments, the inflation may actually be -0.1pp lower. The low inflation is a blow to the Riksbank’s expectation that core inflation will remain high throughout the year. Obviously, there are reasons for the market to start pricing some probability of the Riksbank taking back the most recent hike at some point. In an interview yesterday after the inflation print, Riksbank governor Ingves said that rates could return to negative if necessary but that other policy actions could also be considered, including 2009-style loans to corporates (more specifically via banks).
In the US, there were three key takeaways from the FOMC minutes in our view. First, the minutes did not contain any new policy signals as expected given numerous FOMC members conveying their views recently – the Fed still thinks the ‘current stance of monetary policy is appropriate’ but that the coronavirus is a new downside risk worth monitoring. Second, the Fed is moving forward with the discussions on creating a standing repo facility and says it expects the level of reserves to reach USD1,500bn before April. The third and probably most interesting part was that the Fed discussed how to tweak the current symmetric 2% inflation target. The Fed still seems to like the idea of implementing some sort of average inflation target, where inflation should be 2% on average over time. One idea that was discussed is to make a temporary asymmetric operational inflation target range – see our Fed Monitor.
On Brexit, EU ambassadors yesterday failed to agree on an approach to a level playing field in the upcoming negotiations with the UK. A new meeting is planned for Monday with the ambition to sign off a negotiating mandate next week, so the actual negotiations between the two sides can start in the week of 2 March.
