Market movers today
German ZEW expectations are due out today and we look for a slight further decline. Sentiment has been a bit in retreat recently (albeit from high levels) and we expect the stronger euro to put a further dent on ZEW expectations.
In the US, FHFA house prices are expected to show an unchanged rate of around 0.5% m/m corresponding to a 6% annualised rate. Rising housing wealth is one of the factors supporting US consumers on top of robust job growth and a rebound in real wage growth due to lower inflation.
Otherwise, focus continues to be on Jackson Hole later this week and whether Trump can get focus back on the policy agenda and his apparent new push for tax reform, which was reported by several media out lets yesterday.
Selected market news
According to a Fed survey published yesterday, US workers have low hopes for higher paychecks. When asked what the lowest annual salary was that they would accept in a new job the respondents replied USD57,960 on average in July down form USD59,660 four months earlier. When asked what salary they would expect in job offers over the next four months, the respondents on average replied USD50,790 , down from USD54,590 four months earlier.
In our view, the tightness of the US labour market is not the only factor determining wage growth, as second-round effects following many years of low inflation have hit wage growth. When employees expect inflation to remain low, they can live with low wage growth, as real wage growth may still be solid, making it less likely that inflation will reach the target (see Flash Comment US: Fed likely to continue tightening on strong jobs report, 7 August 2017).
With Steve Bannon leaving his role as Donald Trumps’ Chief Strategist last week, focus is turning to whether this will pave the way for pushing forward a policy agenda that could gain support from Republicans. According to the Financial Times, the new Chief of Staff, John Kelly, is leading efforts to restore order to the White House and the tax cut agenda has been chosen as the best candidate to score a legislative gain and repair relations with the business community.
UK Prime Minister Theresa May’s government is due to publish more details of UK’s Brexit plans today with focus on civil judicial cooperation ahead of a document on the role of the EU Court of Justice on Wednesday.
