Market movers today
Focus today will be on the results of the Italian election and news around the US tariffs on steel and aluminium and retaliation.
On the data front, look out for the US ISM non-manufacturing index for February in the afternoon, where there may be some downside risk after a very strong number in January. In the euro area, PMI services (final) and the Sentix index will be out this morning.
The annual National People’s Congress (NPC) in China started today and will run for about 10 days. Premier Li Keqiang has presented his work report already and announced that the growth target for 2018 will be 6.5%, but did not use the expression ‘or higher’ as some had expected. Fiscal policy is also being tightened as it continues to be focused on fighting financial risks and securing a stable outlook. The NPC is likely to approve the removal of the two-term limit on being president, paving the way for Xi Jinping to stay on beyond 2023.
In the Scandies, the key release today is the monthly house price statistics from Real Estate Norway , see Scandi Markets on page 2.
In terms of the rest of the week, look out for the ECB meeting on Thursday , US non-farm payrolls on Friday and a range of Fed speeches , which will be particularly interesting after the US trade tariffs were announced last week.
Selected market news
Market focus this morning is on markets digesting political developments in the eurozone on Sunday. In Germany, the SPD voted in favour (66% of votes) of a grand coalition with CDU/CSU, meaning a new government should be in place over the coming weeks. The development is positive for the German/French reform push and more accommodative fiscal policies, which is why the EUR gained ahead of the exit polls in Italy. At the time of writing, however, the EUR has erased its gains as projections suggest the Italian election will end with a hung parliament. The anti-establishment parties in Five Start and Northern League seem to be the winners complicating the process for a center-right coaliation to get formed. For more information, see our Italian Election Monitor – Eurosceptic shift released this morning.
In Norway , the government announced new regulation on monetary policy on Friday, which adopted two main changes. First, the inflation target was lowered to 2.0% (from 2.5%). Second, financial stability was formally introduced. Overall, the decision on the inflation target has been underway for some time and only the timing was a little surprising. In addition, the overall change in many ways formalised previous practice. Norges Bank’s inflation projection (see chart ) implies that the near-term policy impact is modest. We stick to our call for a December hike but believe the probability of a September increase has risen.
As expected, Friday’s FX reserve data from Danmarks Nationalbank showed no February intervention. The release did show a sharp rise in government deposits – likely to be a result of pension tax payments – which has implications for DKK liquidity and DGB issuance. See flash comment Denmark: Surge in government deposits but no FX intervention , 2 March.
