Market movers today
After some quiet days (at least in terms of economic data releases) , we have a more act ion packed day ahead of us. We estimate euro area HICP core inflation rose to 1.1% y/y in November from 0.9% in October, as we estimate a rebound in volatile components such as package tours and services related to transport. Here and now, it should not matter much for the ECB after its decision to extend QE to September 2018.
In the US, we est imate PCE core index rose 0.2% m/m in October, as indicated by the CPI figures released already. This would push the PCE core inflation rate up to 1.4% y/y from 1.3%, still well below t he Fed’s 2% target . Note that the Fed has seemed a bit more concerned about the persistently low inflation in recent weeks although this should not change that the Fed is on track to hike in December.
Also, a lot is going on in the Scandies. In Sweden, the government may decide on t he FSA’s amort isat ion proposal. In Norway, retail sales data is due. In Denmark, the second release of Q3 GDP growth is also due.
Selected market news
Yesterday in the US, we saw yields climbing higher across the curve with the 2Y-10Y on the US government bond yield curve steepening around 3bp after a period of a flattening trend in the US yield curve. Similarly, we saw a decent sell-off across curves in the EUR fixed income market with the 2Y-10Y (on the German government bond yield) curve steepening around 2bp. The fixed income sell-off in the US and the euro area came on the back on positive news on the data front , the advance in the US tax bill, Fed Chair Janet Yellen calling the economic expansion ‘increasingly broad based’ and possibly some profit taking by investors.
According to Bloomberg, the US Senate took a step towards the passage of the tax bill, with a l ikely vote later this week, after the US Senate Budget Committee passed the tax bill on Tuesday. However, this is a complicated process, as the Republicans can only afford to lose two votes.
German November HICP inflation came out at 1.8% y/y yesterday, which was slightly above consensus. This supports our call for euro area HICP core inflation today at 1.1% y/y. In addition, the European Commission’s euro area sent iment indicator is continuing to climb, reaching the highest level since 2000.
In the US, both GDP and core PCE figures for Q3 17 were revised up from 3.2% y/y to 3.3% y/y and 1.3% y/y to 1.4% y/y, respectively.
In Sweden, we saw generally strong confidence numbers from NIE with no evidence that households have been affected by signs of a slowdown in the Swedish housing market. Consumer confidence rose to its highest since 2011. In all, a st rong report with some signs of a slowdown in construction. Swedish Q3 17 GDP came out weaker than expected, printing 2.9 % y/y compared to our call for 3.3 % y/y and consensus of 3.5 y/y. Note that Q1 17 and Q2 17 figures were revised down by 0.1pp.
