Market movers today

In the US, the data calendar is light and we expect focus to remain on Donald Trump’s policies. One game changer may be the confirmation of Steven Mnuchin as Treasury Secretary.

In the euro area, the first release of interest is Sentix investor confidence. Sentix trended upwards in H2 16 and reached 18.2 in January 2017, its highest level since August 2015. The current situation and expectations components have both risen to historically high levels but we have seen a loss of momentum in both ZEW and ifo expectations, which could be a drag on Sentix expectations. Therefore, we expect Sentix to rise marginally to 19.0 in February, possibly dragged down by a declining expectations component.

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We are also due to get German factory orders for December today. Factory orders have followed a rising tendency since 2013 but have experienced large fluctuations, with a 5% monthly increase in October and a 2.5% decline in November. We expect a bounce back in December, with monthly growth of 2%. Our view of another increase is supported by the manufacturing PMI in November and December, which showed strength in the new orders indicator.

In the UK, there are no significant data releases. The main event in the UK this week is the House of Commons vote on the Article 50 bill on Wednesday. The vote is expected to be passed and put the government on course to trigger Article 50 on 9 March as planned.

Selected market news

This morning, Asian markets followed US equity markets higher, boosted by the US jobs report on Friday, which revealed surprisingly strong job growth while wage growth remains muted. This is a perfect match for Asian emerging markets as the underlying US economic growth suggests solid global demand, while the risks of a near-term Fed hike (earlier than our expectation of a June rate hike) appears relatively slim given the muted inflationary wage pressures in the US economy. The market is pricing in only about 45% for a rate hike in May, while about 75% for a rate hike in June.

Furthermore, financial sector stocks were buoyed by talks on the possible easing of financial regulation by the Trump administration. The National Economic Council Director Gary Cohn indicated on Friday that the new administration will look at the Volcker Rule and ‘all aspects of the Dodd-Frank legislation’ in order to free up capital and stimulate lending to the economy.

Meanwhile, other aspects of Trump’s policy agenda remain in doubt. Over the weekend, Trump lost a bid to restart the travel ban while the US appeals court reviews the immigration restrictions. Moreover, the US administration imposed new sanctions on Iran on Friday following the recent missile test by Iran. The sanctions target 13 individuals and 12 entities seen as being linked to terrorism. The policy announcements from the US administration will continue to be closely scrutinised this week, amid a very thin data calendar in the US.

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