Market movers today
Today is another quiet day in terms of global data releases. The EU press conference on trade talks with China (market access, investment, US tariffs and intellectual property rights) may be interesting given the current focus on global trade policy.
Japanese Prime Minister Shinzo Abe will play host to South Korean President Moon Jae-in and Chinese Premier Li Keqiang.
In the Scandies, focus is on Swedish and Norwegian inflation data for April. In Sweden, we estimate CPIF excluding energy to be 1.2%, 0.2pp below the Riksbank’s forecast. In Norway, we estimate CPI core inflation rose to 1.4% y/y in April from 1.2% in March. For more details, see page 2.
Selected market news
Last night, US President Trump announced that the US will withdraw from the Iran nuclear deal from 2015 and reinstate the highest level of economic sanctions on Iran. Trump said that the US will work with its allies to prevent Iran from developing nuclear weapons, but also noted that he is willing to negotiate a deal with Iran. According to a statement from the US Treasury Department, sanctions will be reinstated after ‘wind down periods’ of 90 or 180 days and thus take full effect after 4 November. See Flash Comment International: US withdraws from Iran nuclear deal , 8 May, for more details.
European leaders have expressed their regrets and concerns over Donald Trump’s decision to re-impose US nuclear sanctions on Iran and EU’s foreign policy chief, Federica Mogherini, said ‘the European Union will remain committed to the continued full and effective implementation of the nuclear deal’.
The market reaction to the announcement from the US was muted overall suggesting that this move from the US was likely to have been priced into the market already, and while the situation should be monitored, this does not change our economic or financial forecasts at this stage. Price actions in the oil market last night underscore that it is unclear whether this will affect Iran’s oil exports and thus the oil market, e.g. the US does not import oil from Iran. The oil price rose initially with Brent crude rising USD1/bbl and above USD75/bbl and after a short correction lower, it has continued higher overnight trading at USD76.60/bbl this morning.
In Japan, data released this morning showed that wages rose at the fastest pace since 2003 with regular wages jumping 2.1% y/y in March. Many Japanese companies have struggled to find employees due to a very tight labour market, and the gains in regular wages in March were partly the result of companies hiring more permanent, full-time workers, who generally receive higher pay. Overall, today’s wage figures are an encouraging sign for the Bank of Japan, which still struggles to push inflation higher. We still expect the Bank of Japan to keep its monetary policy unchanged in the next 12 months, but we will monitor the development in the labour market and wages closely for any signs that wages may accelerate further.
