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Focus On Yellen And UK Retail Sales

Market movers today

The key event today will be the vote in the US House of Representatives on the American Health Care Act (Trumpcare), which is to replace Obamacare. It is a close call and the uncertainty was the trigger for the Tuesday stock market sell-off. A rejection of the bill will delay Trump’s plan for tax cuts and infrastructure spending and put into question his ability to govern even with a Republican majority in both houses of Congress. See The Washington Post, 23 March 2017.

The results of the fourth and final ECB TLTRO are due to be announced today. We expect a take-up of about EUR250bn, which is a significantly higher figure compared to the first three auctions. We expect higher demand at the final auction because (1) banks have increased information on the interest, (2) it is the final opportunity to acquire liquidity with an interest rate no higher than 0%, (3) markets are pricing in an increasing probability of an ECB hike, making the TLTRO II more attractive and (4) French banks could demand extra liquidity ahead of the election.

Fed Chairman Janet Yellen (dove) is due to speak today at a Community Development Conference. It is not clear if she will talk about the overall economy but if she does, we do not expect her to change much compared to the Fed press conference last week.

UK retail sales for February will get some attention as the two past months of weakness broke a strong trend in 2016. A small increase of 0.4% m/m is estimated by consensus.

Other data released today on the global front will be initial jobless claims, US new home sales and euro consumer confidence. We do not expect these to have any big market impact.

There are no market movers in Scandi today.

Selected market news

Markets have consolidated a bit yesterday and overnight after the risk-off day on Tuesday. Stocks and bond yields have seen a slight increase while EUR/USD is a bit lower in Asia trading. Oil prices are up close to USD1 per barrel from the low yesterday to USD51 per barrel (Brent).

We continue to see a risk of a further correction in markets in the short term as momentum has been very strong for a long time, which normally leads to profit taking and a market correction at some point. We also believe we are close to a peak in the global manufacturing cycle, which has been a key ingredient behind the strong rally.

Yesterday, London’s worst terror attack in more than a decade left five people dead and at least 40 injured.

Chinese short-dated repo rates came down overnight following a spike yesterday on the back of tighter liquidity. However, the three-month and 12-month money market rates continue to climb higher, increasing the cost of longer-term funding for banks – not least institutions within shadow banking. The three-month money market rate is now at 4.44%, up from 2.8% in October.

Danske Bank
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