Signe Roed-Frederiksen
Danske Bank A/S
Market movers today
Euro-area retail sales are expected to have continued to increase in January after the German figure released yesterday was very strong. The increase should reflect that private consumption has strengthened as consumers’ purchasing power has been boosted due to the lower gasoline price. In light of this the deflation in the euro area has not resulted in postponed consumption in anticipation of declining prices.
Focus is also on euro-area service PMIs with most attention on the first release of the Spanish and Italian figures. In Spain new orders should continue to point to stronger growth, whereas the Italian PMI suggests stagnation will continue. In the UK we expect the service PMI to increase to 57.8, indicating that the UK economy continues to recover. Due to a large service sector in the UK the service PMI is more important than the manufacturing PMI.
In the US we expect a minor decline in the non-manufacturing ISM to 56.5 but the index remains at an elevated level. The service sector is benefiting from the boost to households’ spending from the lower oil price and is less sensitive to a stronger USD than the manufacturing sector.
Ahead of the release of the US labour market report for February the ADP employment report is likely to get some attention today. For more about the US labour market.
Norwegian house prices for February could surprise on the upside.
Selected market news
Danmarks Nationalbank (DN) published its FX reserves yesterday, which showed interventions of DKK168.7bn in February. According to DN the interventions were concentrated in the first part of the month and the central bank did not intervene in the FX markets in the latter part of February. We expect DN to keep EUR/DKK stuck in the range of 7.4440-7.4700 in 1M-12M and do not expect it to make changes to the key policy rate within the coming 12 months.
India’s central bank cut its benchmark repurchase rate to 7.5% from 7.75% this morning in a surprise move, citing weakness in economic growth. Sentiment in Asian trading has generally been risk off with equity markets trading lower this morning.
US auto sales for February released yesterday were surprisingly weak, showing a dip to 16.2m in annualised sales pace, down 3% from January. Dealers did refer to the extraordinarily cold weather in February as a factor dampening sales in the latter part of the month. In general, US data received so far for February have been on the weak side of expectations and the weather could be a general factor that constrained growth last month. Treasury yields moved slightly higher across the curve yesterday, as positioning ahead of Friday’s employment report continued, while US equity markets took a dip.
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