Jens Nærvig Pedersen
Danske Bank A/S
Market movers today
In the euro area we expect higher PMI figures, which would be in line with the increase in the business climate indicator. Current survey data indicate that Germany is regaining momentum, whereas France and Italy are lagging behind. Added to this, the German PMI order-inventory balance has almost rebounded, suggesting firms no longer need to work off high inventories.
The German ZEW expectations should also rise further after bottoming in October. The Sentix expectations, which are a good leading indicator for ZEW expectations, have increased to the highest level since March 2014. Although this survey of financial analysts is criticised much, it has been very good at determining shifts in the business cycle.
In the US, Markit manufacturing PMI should increase and close some of the gap to the very high level of the ISM. An increase in the PMI would also suggest the impressive industrial production in November was not just a one-off. US housing starts and building permits are also due for release today.
In the Scandi markets focus will be on the Riksbank meeting. We expect the Riksbank to lower its growth and inflation forecast and to postpone the date for the first rate hike (currently in Q2 16). Forward guidance is the Riksbank's first line of defence.
Selected market news
The fast decline in the oil price continues to top the headlines as Brent tumbled another USD2/bbl yesterday and fell below USD61/bbl. The main driver yesterday were the comments from UAE energy minister, Mazrouei, putting blame on US shale producers for the recent slide in the oil price and further dismissing a cut in OPEC production. News from Canada that the heavy oil-sands production is projected to continue surging next year further weighed on prices.
The plummeting oil price is a pain for large oil-producing countries. This point was highlighted by the unprecedented move by the Russian Central Bank (CBR) last night to hike its key interest rate by 650bp to 17%. The hike comes after the rouble on Monday saw its biggest one-day decline since the Russian crisis in 1998 and in our view is a clear signal that the CBR is now thinking that the sell-off in the rouble is threatening financial stability. However, the CBR is also likely to react to mounting political pressures to act to curb the rouble sell-off – see China: HSBC PMI declines more than expected, no signs of impact from interest rate cut.
China’s HSBC Manufacturing PMI declined to 49.5 in December from 50 in November missing both the consensus expectation of 49.8 and our own estimate of 50. The weak number highlights that further easing, e.g. a cut in banks’ reserve requirement could be needed in order to lift Chinese economic growth. The disappointment weighed on Asian stock markets as well as the copper price.
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