Market movers today

In the euro area, the final HICP figures for March are due out. The initial prints surprised on the downside, where non-energy industrial goods in particular were a drag on core inflation. The details will show whether the weak core figure was a result of the lagged impact of the euro appreciation or one-off factors with less concern for the ECB (see tweet ).

UK inflation data for March is also on the agenda. We estimate CPI inflation was unchanged at 2.7% y/y in March (but lower second decimal), while core CPI inflation may have risen to 2.5% from 2.4%. Our base case is still that CPI inflation will move lower this year, as food price inflation has peaked, energy prices are stabilising and the impact of past GBP depreciation is fading.

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We have no market movers in Scandinavia today.

Selected market news

The US earnings season is in high gear and the S&P 500 advanced by 1.1% yesterday, propelled by strong results from Netflix, Amazon and Twitter. Asian stocks are also in the green this morning, supported by the weak yen and China’s decision yesterday to cut the Reserve Requirement Ratio by 1pp, a measure we think is targeted at increasing loans to small and micro enterprises, to stimulate innovation and entrepreneurship in the country. EUR/USD and 10Y US Treasury yields were steady. Yesterday was another positive day in the European government bond market with a decline in yields combined with a spread compression and especially Italy was the big winner. The 10Y spread between the peripheral markets and Bunds continues to grind lower as the peripheral markets are being supported by higher ratings as seen last Friday in Spain and an expected upgrade of Portugal on Friday.

In the ongoing trade dispute, China seems to have adopted a ‘carrot-and-stick approach’, promising to abolish foreign ownership caps on electric vehicles, shipping and aircraft manufacturing by the end of the year, while at the same time imposing a 178% import duty on US sorghum crops

German ZEW expectations for April surprised on the downside and dropped to the lowest level since 2012, continuing the recent streak of weak euro area economic data. It was a first indication of how much the latest US-China trade war tensions and geopolitical risks around Syria have dented investor sentiment and we expect similar declines in the April Ifo and PMI readings next week. ZEW expectations now point to a clear growth deceleration (see tweet ), but we still look for solid GDP growth of 2.1% in the eurozone in 2018. In its new WEO projection released yesterday, the IMF comes to a similarly positive assessment, expecting eurozone growth of 2.4% and 2.0% for 2018 and 2019, respectively.

Japanese exports grew by 2.1% in March, less than expected. Foreign demand remains the key growth driver in Japan, as exporters enjoyed the tailwind from the strong global economic upturn. However, recently we have seen the beginning of export weakness, with the yen strengthening and sentiment indicators such as PMIs and Tankan pointing towards some slowdown.

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