Danske Research Team
Danske Bank A/S
Market Movers
We expect the Swedish Riksbank to cut the repo rate by 10bp today at its non-policy meeting and see a risk of a larger cut. For more on Scandi markets see page 2.
In terms of data, the calendar is light with only the US NAHB index for May on the agenda. The housing market has been the bright spot in US data recently and consensus is for a one notch increase in the NAHB index.
Greece is likely to get some attention this week as comments ahead of the EU summit in Riga on 21/22 May show that negotiations will be tough.
Other key events this week are the minutes from the April FOMC meeting (Wednesday), BoE minutes (Wednesday), the US CPI report (Friday), Fed Chair Yellen’s speech on the US economic outlook (Friday), Markit PMIs (Thursday), German Ifo (Friday) and the BoJ monetary policy meeting (Friday) and Q1 GDP (Thursday).
Selected Market News
German and US yields moved significantly lower Friday led by the long end of the curve. The movement started in European trading but was further supported by the release of the weak preliminary May University of Michigan consumer confidence released in the afternoon. Consumer sentiment declined almost 7 points to 88.6, which is likely to be in part driven by higher gasoline prices in the first weeks of the month. This also explains the increase in one-year-ahead inflation expectations to 2.9% from 2.6%.
This morning, Japanese core machine orders surprised on the upside rising 2.6% m/m in March and are now up 6.3% over the past three months. Chinese home prices released this morning showed that home prices declined in 47 out of 70 cities last in April down from 49. House prices rose in 18 cities, which is six more than in March. Asian stock markets have generally taken the news positively with most indices up and Japanese stocks taking the lead.
The EUR continues to strengthen against the USD and moved above 1.14 on Friday. The move came despite a statement from the Syriza parliamentary group that urged any deal with the EU, IMF and ECB to respect the so-called red lines set up by Prime Minister Tsipras.
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GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
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