Market movers today
In the euro area, market focus will be on GDP figures for Q4 17 today. Growth was strong in the first three quarters of 2017, with the latest print for Q3 at 0.7% q/q.
Both survey and activity indicators have pointed towards continued strong growth and hence we look for another solid reading of Q4 GDP growth of 0.6% q/q. As it is the first release, we will not yet receive much detail on the growth drivers though. Note that France and Spain will also release preliminary Q4 17 GDP data today.
Also in the euro area, German inflation figures are published, ahead of the euro area HICP data tomorrow. Markets are likely to look out for any signs that core inflation is picking up, as visible inflationary pressure in t he euro area’s biggest economy remains largely absent .
The ECB’s Yves Mersch will also speak in Frankfurt and markets will watch out for further insights into the cont rasting views within the Governing Council at the moment .
In the US, today’s key event will be Donald Trump’s State of the Union speech. We will look out for hints on infrastructure spending and protectionist trade policy measures.
In the Scandi markets, Danish business confidence data and Norwegian retail sales for December are due to be released.
Selected market news
The EUR fixed income markets continued to be under pressure yesterday with the entire yield curve moving higher. However, the sell-off did diminish somewhat late last night as an ‘ECB sources story’ surfaced stating that the ECB’s QE will end with a short taper rather than a sudden stop. According to the story, even the more hawkish GC members endorse a gradual slowdown of QE after September.
Japanese figures out this morning on the labour market giving mixed signals. The unemployment rate increased from 2.7% in November, the lowest level since 1994, to 2.8% in December, whereas the jobs-to-applicants ratio increased further, now standing at 159 jobs for every 100 applicants – the highest since 1972. The tightness of the labour market is of historic proportions and still no pickup in core inflation. Coming spring wage negotiations will be key here.
Regarding the US debt limit suspension, the US Treasury Secretary Steven Mnuchin said that he can extend the suspension period in to February be fore the government’s borrowing capacity is exhausted, i .e. beyond the end of January deadline he had given previously. Yesterday, the US Treasury published new cash balance estimates with its estimate at the end of Q1 18 revised down to USD210bn from USD300bn (October est imate). However, the US Treasury expects the cash balance to be USD360bn at the end of Q2 18, which would lead to a tightening of USD liquidity.
