Allan von Mehren
Danske Bank A/S
Market movers
Today we have a relatively light calendar with the US flash estimate for Markit services PMI in April as the only notable data release. The services PMI has been much more resilient than the manufacturing PMI but it is expected to have eased slightly from its high level above 59 in March.
ECB Council members Coeure and Constancio are both scheduled to speak today in connection with a conference on ‘European Financial Integration and Stability’ in Brussels.
Outside Scandinavia focus should at least temporarily turn from Greece to the Fed and US data this week. We expect the Fed to largely repeat the message from the previous meeting in its statement on Wednesday and to view the current weakness as temporary, see FOMC preview released this morning.
US data this week include Q1 GDP (Wednesday), the employment cost index (Thursday) and ISM manufacturing (Friday). In the euro area the main data releases are money and credit growth (Wednesday) and preliminary CPI (Thursday) where we look for an end to deflation with a rise in the inflation rate from -0.1% y/y to 0.1% y/y.
On Wednesday focus turns to the Riksbank meeting where we look for a rate cut of 10bp and an expansion of the QE programme of SEK30bn to a total of SEK70bn, see Weekly Focus: Riksbanken to add fuel to the currency war, 24 April.
Selected market news
As expected, the Eurogroup meeting on Friday did not get us any closer to a solution between Greece and the EU. Despite signals from the Greek prime minister and finance minister that the parties were getting closer to a deal, there were no such signals from the meeting. Instead euro-area finance ministers expressed great frustration over what one finance minister described as Varoufakis’s lecturing style and failure to make good on his pledge. The Greek finance minister is also facing challenges at home, as a poll showed declining support for his confrontational style to 46% from 56% one month ago. We continue to expect a solution during summer but not until it is absolutely necessary to keep Greece in the euro.
US stock markets rose further Friday as S&P500 closed at a new high on the back of decent earnings reports. Asian markets were mostly higher overnight. On Friday US durable goods orders showed more weakness in April likely due to continued declines in investments in the hard hit energy sector. US bond yields fell in response and the first Fed hike priced in the market has been pushed to Dec/Jan. However, we expect data surprises to go higher over coming months and continue to look for a September hike.
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