Market movers today
Today, we publish the third paper in our series on inflat ion and what it means for markets. In t oday’s piece we dive int o t he inflat ion development in t he Scandinavian count ries.
Today’s main event is t he release of euro area HICP inflation at 11:00 CET . With Spanish HICP surprising slightly on the upside this morning and German HICP slight y lower than expected, we see risks for the euro area print tomorrow as balanced and stick to our forecast of 1.24% for headline and 1.05% for core.
Tier 2 releases today include German unemployment rate and the second release of US GDP growth for Q4.
More interesting is the EU’s Chief Brexit negotiat or Michel Barnier, who is due to brief the permanent EU representatives on Brexit today. They are expected to adopt the withdrawal text , which will be published.
We have a lot on the plate in the Scandies today. In Norway, retail sales in January and the quarterly wage statistics for Q4 are due out today. In Sweden, we have Q4 GDP, retail sales and Sweden’s National Housing Board is due to publish a report on the Swedish housing market . In Denmark, the second release of GDP will give more detail on what drove growth in Q4.
Selected market news
Stock markets sold off, bond yields rose and the USD strengthened on the back of the new Fed Chairman Jerome Powell’s first testimony. Powell gave a positive view on the economy and said his personal out look for the US had strengthened since the December meeting. It opens up for the Fed eyeing four hikes instead of three in 2018. See Flash Comment US: Powell says ‘personal outlook has strengthened’, 27 February 2018.
Chinese official PMI manufacturing for February fell more strongly than expected, pointing to a slowdown in the Chinese economy, see chart. The index fell to 50.3 (consensus 51.1) from 51.3. It is the lowest level since July 2016. While the drop is bigger than expected it is broadly in line with our out look for a slowdown in the Chinese economy this year, which is engineered by financial tightening to reduce leverage and cool the housing market . The months around the Chinese New Year always create some distortion so the weakness of the data should be taken with a grain of salt . Tomorrow, private Caixin PMI data is due out .
In Japan, preliminary industrial production for January also disappointed. The numbers showed a decline of 6.6% m/m (consensus -4.0% m/m) after a rise in December of 2.9% m/m. It was the biggest monthly drop since 2011. Japanese retail trade also fell more than expected.
While the data out of Asia probably exaggerates the weakness, it is more evidence that the global business cycle reached a peak in early 2018 and is set to lose a bit of steam during the year after finishing 2017 on a very strong note. We still expect global growth to be robust , though and underpin decent profit growth.
