German Ifo has weakened a bit

Market movers today

A fairly light global calendar. In the euro area we expect German industrial production to have decreased slightly. German Ifo has weakened a bit and also the factory orders released on Friday showed a decrease. German industrial production has shown solid readings during Q1 and we expect the near-term weakness to be a soft patch and growth to pick up during H2.
The sentix investor confidence is the first July print that is being released. This indicator tends to have little market impact as the direction in general is more correlated with market sentiment than economic activity. We expect a minor decrease as euro-area data releases have been surprising on the downside lately. This is also reflected in the surprise index that has dropped to around a one-year low.
At tonight’s Eurogroup meeting the euro-area Finance Ministers are set to approve a EUR1bn tranche for Greece.
As the US was closed on Friday due to Independence Day, market attention in the US session is likely to remain on the implications of the strong non-farm payrolls. We expect trend job growth to rise gradually to 250k-300k in H2, as growth picks up further steam. As core inflation is also bottoming out and housing is expected to recover, this will likely lead to less dovish talk from Fed during the autumn and more risk/term premium in the US money market curve.

Selected market news

From a market perspective it has been a calm weekend reflecting that summer has arrived. Despite a small setback on Friday European stocks had a good week supported by the strong US job report and a ‘dovish’ Draghi on Thursday. The Euro Stoxx 50 ended the week up by 1.1 % despite the 0.6% decrease Friday. In Asia stock indices are trading slightly in red this morning and the EUR/USD has continued lower as we enter the week at 1.358.
Peripheral government bonds spreads versus Germany tightened further in Friday’s session extending Thursday gains that were fuelled by the dovish details on the TLTROs. Ireland was the top performer Friday with a 4bp drop in the 10Y yield. The performance was supported by the very strong growth figures that were released Thursday. The Irish recovery has accelerated this year and with the government set to beat the fiscal target for the fourth year in a row, Ireland is likely to be able to reap the reward in the form of more rating upgrades in H2.

Scandi markets today

Denmark and Norway are releasing industrial production figures today. In Denmark industrial production has been trending upwards since autumn 2009, although it is still some way off pre-crisis levels. We expect a decrease of 0.5% m/m in May following a fall of 1.4% m/m in April as we expect firms to have plenty of goods in stock and can now afford to ease off on production. The main releases in Scandinavia this week are the June inflation figures on Thursday.

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