IMF sharpens its tone on Greece

Market movers today

• In the euro area it is a quiet day in terms of data releases. The European Commission will release its spring forecast and we expect it to revise its economic growth and inflation forecast higher for 2015 as data surprised positively in Q1.

• In the US the ISM non-manufacturing survey is set to be released and we look for a set-back to 55.7 in April from 56.5 in March, still in the high end of the range during the current expansion.

• In Denmark April’s FX reserve figure will reveal whether Danmarks Nationalbank has sold FX in intervention to support DKK. In Sweden industrial and service production for March are released. For more on Scandi markets see page 2.

Selected market news

The US Federal Reserve’s Senior Loan Officer survey discards that the US economy experienced a credit crunch in the spring as suggested by the National Association of Credit Management’s Credit Market Index last month. The Fed’s survey covering the three months up to April showed that banks generally eased credit conditions across loan categories this spring. Overall, the tighter lending standards seemed to be confined to the oil and gas extraction sector, see Fed's Senior Loan Officer Opinion Survey: furthereasing of lending standards this spring, 5 May 2015.

The IMF sharpens its tone on Greece as it may hold back its portion of the EUR7.2bn tranche that Greece needs in order to avoid bankruptcy. Half of the tranche should come from the IMF but may be held back without a debt write-off. According to the IMF Greece is on track to run a large primary budget deficit, implying the debt would start to rise without further austerity measures or debt relief. Both the Greek government and the euro-area creditors are likely to be against further debt relief.

In Italy, Prime Minister Matteo Renzi has got approval for an overhaul of the electoral law with the aim of easing political gridlock. Italy has a history of frequent government collapses but this should diminish under the new law where extra seats will be assigned to the winning party, thereby reducing the risk of hung parliaments. Critics argue the law hands too much power to the executive branch.

This morning the Reserve Bank of Australia cut interest rates by 25bp in an attempt to ease the transition of a heavily commodity-based Australian economy to a more diversified model.