Market movers today
The main event today is the FOMC minutes from the January meeting. The statement has not changed significantly but the minutes may give an overview of the different opinions within the Fed. In particular, we are interested if the minutes will indicate whether the tax reform will cause more rate hikes than the three the Fed signalled in December. We still expect an increase in the interest rate at the next Fed meeting in March.
Furthermore, the US Markit PMI service and manufacturing indices for February are due for release. We estimate Markit PMI manufacturing rose further to 56.5 and the service index to rise in February, up to 54.
In the euro area, February’s PMI figures are due for release. Manufacturing PMI saw a large fall to 59.6 in January and the leading order-inventory indicator has been declining since October 2017, pointing towards lower manufacturing output in the near future, while the extremely high optimism for the manufacturing sector is likely to be exhausted and head to lower levels. We expect manufacturing PMI to be 59. 3 in February and believe that service PMI is also set for a similar decline to 57.6.
In the UK, focus is on the labour market report for December. We estimate that the unemployment rate (3M average) i s unchanged at 4.3%. The report is important, as the market is trying to assess whether the Bank of England will hike as early as May .
In Norway, we will get LFS jobless data for December, and we expect a modest decline on the back of the modest decline in the NAV’s numbe rs.
Selected market news
There is significant focus on this week’s US Treasury auctions given the possible impact on both the dollar and global bond markets – whether investors require a higher premium to buy dollar assets given that the hedging costs for non-US investors continue t o rise. At yesterday’s auction the yield on the 2Y notes was the highest in a decade, but demand at the auction was decent. Today, the Treasury will 5Y notes as well as 2Y floaters.
The US equity market closed in the ‘red’ with a decline in the major indices. The VIX index also moved higher although a modest pace. Hence, the uncertainty is still there. The negative sentiment from the US has sent the Asian equity markets lower as well this morning. The dollar has been range bound relative to the yen and the euro. The Swedish kroner is test ing the 10 level versus the euro after the lower-than-expected Swedish inflation data released yesterday.
The Swedish bond market also rallied yesterday and outperformed EU peers. Hence, there will be significant focus on the Swedish borrowing requirement . We expect to see solid demand at the Swedish government bond auction today.
