Arne Lohmann Rasmussen
Danske Bank A/S
Market movers today
In the data calendar the main event today is the release of February retail sales in the US. We expect headline retail sales to rebound 0.3% m/m on the back of a very weak January where bad weather weighed on consumer spending. Despite the expected rebound in February, the conclusion remains that consumer spending has lost considerable momentum in the US.
In Europe, the French consumer prices (HICP) deserves some attention as it is prime suspect for the unchanged euro area inflation in February as German, Italian, Spanish and Dutch inflation were all lower. We expect French inflation to have increased to 1.0% y/y from 0.8% y/y mainly due to higher core inflation. If we are right, the implication is that euro area inflation for February should be revised down to 0.7% y/y.
In the US at 15:00 CET, the Senate Banking Committee will hold nomination hearings for the Fed board of governors. Stanley Fischer (nominated as vicechairman), Lael Brainard and Jerome Powell (nominated for two ordinary vacant seats) will be present at the meeting. Finally, ECB president Mario Draghi is scheduled to speak late this afternoon in Vienna in connection with the Schumpeter Award Ceremony.
Selected market news
Yesterday ECB members continued to say that the message from last week’s meeting was not as hawkish as interpreted by the market. Chief ECB Economist, Peter Praet, said that the ECB was in fact reinforcing its forward guidance, by referring to the significant economic slack in the eurozone. There was one interesting comment though, from Spanish Governor Linde, who suggested that the ECB may have to take new measures in the coming months ahead of the 3Y LTRO expirations in 2015. But nevertheless the market has certainly lost faith in the ECB, which is probably most clearly reflected in EUR/USD, which is now trading at 139.40 – the highest level since October 2011.
Overnight New Zealand became the first OECD country to hike rates this year. RBNZ hiked rates by 25bp to 2.75%. Central bank governor Wheeler cited higher-than-expected growth and increasing inflation pressure. Even though the rate hike was expected, upbeat rhetoric has pushed NZD/USD to the highest level since April last year. Very strong Australian employment data has also supported AUD.
The UK RICS house price indicator was released overnight. It dropped from 52 to 48. Still a very high level, but an indication that the UK housing boom has lost a bit of steam. RICS says that the pent-up demand for housing after the crisis is now exhausting itself.
The Crimea crisis continues to put a damper on risk appetite especially in Europe. Overnight Obama warned Putin that annexing Crimea would be costly for Russia. So far no de-escalation of the crisis has been seen and any news will be followed closely today.
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