Market movers today
In the UK, the labour market report for March is due. We estimate the unemployment rate (3M average) will be unchanged at 4.7% while we estimate the annual growth rate in average weekly earnings (3M average) declined to 2.0% y/y from 2.3% y/y. The combination of higher inflation and slower wage growth means real wage growth is turning negative, implying less scope for private consumption growth. This is one of the reasons why we expect UK GDP growth to slow this year. Indeed, we have seen the first signs that this is actually happening. In recent months, retail sales have plunged the most since the financial crisis and although it is a weak indicator, it is a sign that private consumption growth has actually slowed.
Otherwise, there is very lit t le happening on the data and macro front ahead of the Easter holiday
Note. Due to the Easter holidays, the next publication of Danske Daily will be Tuesday 18 April.
Selected market news
Geopolitical tensions keep rising as the US Secretary of State Rex Tillerson accused Russia of t rying to shield Syria’s government from the blame for a deadly gas at tack (full story Reuters). However, in a Fox interview, Donald Trump stated that he has no plans of ‘going into Syria’. Tensions are also rising on the Korean peninsula, where the Japanese navy plans to joins the US navy in deterring the North Korean regime from further missile tests.
Swedish inflation decreased in March (CPI: 1.3% and CPIF: 1.5%) and printed well below both market expectations and t he Riksbank’s t arget . While t he t iming of East er holds some of the explanat ion (some rebound can be expected in April), the Riksbank’s chances of reaching the 2% inflat ion target over the next couple of years seem slim, given that significant wage drift on top of cent ral wages will be necessary, a t rend not observed in recent years.
The Bank of Japan (BoJ) and Minist ry of Finance have released their balance of payment data (i.e. Japanese investor flows ) for February. While the Japanese investor decreased their holdings of foreign debt generally, the most noteworthy was the fact that Japanese investors accounted for net selling of more than EUR12bn of French government bonds, while increasing t heir purchases of German government bonds. This ‘safe haven’ flow is likely to be closely related to the polit ical uncertainty stemming from the upcoming French election.
Yesterday’s risk-off moves seen in the European and American markets have spilled into the Asian session, with Hang Seng t rading slight ly lower and Nikkei losing some 1.2% at the t ime of writ ing. It should be noted that USD/JPY has moved below the 110 mark for the first time since mid-November last year and has been trading in the 109.40-109.50 range this morning.