Market movers today
It is the last week ahead of the Easter Hol iday and the data calendar is dominated by not least CPI inflation prints across the globe. Today, the inflation set is kicked off with data out of Norway and Denmark. Also, we will get Danish balance of payments data and the Swedish labour force survey release. See page 2 for more details.
In the US, today brings the first of several speeches by the FOMC scheduled in the coming weeks as Fed Chair Janet Yellen is set to speak tonight . We do not expect any major news but focus will naturally be on t he Fed’s int ent ion to start quant itative tightening.
In the euro area, the Sen ix investor confidence is due to be released. Sent ix climbed from 1.7 in July 2016 to 20.7 in March, which is the highest level since the financial crisis. As noted last month, political uncertainty has derailed financial sent iment while PMIs and other survey indicators show st rength consistent ly. We therefore expect Sent ix to increase marginally to 21.0 in April as we also note that the historically high level makes further upside surprises less likely.
Selected market news
Friday’s US non-farm payrolls report disappointed market expectations as the headline print of 98,000 new jobs fell far short of Wednesday’s ADP report signal. Yet , despite the disappoint ing headline and negat ive revisions, we st ill think the overall picture is that of an improving US labour market . In part icular, we highlight that the weather hit job growth negat ively in March and a correct ion generally following the previous two st rong prints is not unusual. Friday’s print leaves the Fed facing a 3M moving job growth average of a decent 178,000 with unemployment and underemployment falling while wage growth is slowly picking up. We therefore maintain our call for an addit ional two rate hikes this year (July, December) and that the Fed is likely to start reducing its balance sheet from Q1 18, possibly even in Q4 17.
The US-China presidential meeting between Presidents Trump and Jinping, which ended on Friday, underpinned a much needed good start to the init ial working relat ionship. Nevertheless, the meet ing was also a reminder that the disagreements between the US and China are real and that the potential implicat ions are non-negligible. Trade is a key area of disagreement and it is therefore posit ive with the seemingly first minor t rade deal following the meet ing as China prepares to ease beef import restrictions from the US and the majority stake regulat ion in finance.
Over the weekend, the Pentagon decided to divert an aircraft carrier group to waters near North Korea in a move aimed as a "show of force" according to FT.
The weekly IMM Positioning Update – investors trim JPY shorts, 10 April, revealed little change in speculative positioning although the rise in long gold bets suggest s increased investor caution. In Friday’s Strategy piece, we also highlight ed how mount ing signs of the business cycle peaking should lead a pause in the equity bull market and mark the end of the bond bear market . See ‘‘Risk factors move to the fore as business cycle peaks’, 7 April for more details.