Market movers today
German industrial production data for January (due at 08:00 CET) is likely to show a large monthly increase following the strong factory orders in December.
The UK Spring Budget will be presented by the Chancellor of the Exchequer, Philip Hammond, today at 13:30 CET. Speaking on Sunday, Mr Hammond rejected calls to increase borrowing, favouring a cautious approach to ensure adequate reserves. According to media reports , the government plans for a GBP60bn ‘war chest’ in order to boost the country’s resilience to turbulence that may ensue as the UK withdraws from the EU, and fresh spending may thus be funded by cuts elsewhere. Further leaks suggest that the Chancellor may finance a boost in healthcare spending by raising taxes.
Selected market news
May suffers defeat in UK Parliament on Brexit-trigger law. The House of Lords yesterday backed an amendment to Article 50 that will require the government to bring the final terms of Britiain’s exit from the EU before Parliament for approval. The amendment is seen as a defeat for Prime Minister Theresa May, as MPs will have the ability to send her back to the negotiating table to seek better terms if the exit conditions are not considered good enough.
US equities struggled. The S&P500 index traded 0.3% lower yesterday. A new tweet from US President Trump that he intends to drive drug prices ‘way down’ as well as the revelation of plans to repeal Obamacare drove down pharmaceutical and healthcare stocks.
Fed hike pricing moving higher still. A March rate hike is considered more or less a given, unless Friday’s employment report disappoints significantly. Following a further increase in short-term yields, markets are now discounting a probability of some 85%. This also seems to be the main driver for the dollar, with the USD index up 0.2%, despite news that the US trade deficit reached the largest level in real terms since 2015.
Japanese economy expands less than expected in Q4. A bunch of Japanese economic data was released overnight. Notably, GDP expanded again in Q4, implying four consecutive quarters of growth, the longest run in more than three years. However, at 0.2% q/q, the economy grew by less than expected (0.3%). Growth has been driven mainly by exports recently.
