Market Movers
The main event today will be the ECB meeting. We do not expect any policy changes or new signals. Draghi is likely to continue to signal a firm commitment to continue the asset purchases until September 2016. Focus will be on a) the Greek situation, b) the frontloading of ECB purchases and how much flexibility there is in its purchases and c) a likely small lift to its inflation projection for 2015 following the rise in the oil price since the projections in March.
Final services PMI for the euro area will include data for Spain and Italy. The UK also releases services PMI, which is expected to be unchanged
ADP employment numbers in the US will give more input to Friday's payrolls number. The ADP data only cover private payrolls and are expected to show a rise of 200,000 in May, up from 169,000 in April.
US ISM non-manufacturing is expected to show a small decline to 56.0 (consensus 57.0). However, it follows a decent rise in April to a pretty high level of 57.8 (longterm average is 54.0) and is still in line with growth above trend in the service sector.
For more on Scandi markets see page 2.
Selected Market News
Greece’s creditor institutions (EU Commission, IMF and ECB) have reached a common footing in terms of a proposed deal to the Greek government. The creditors have finished a draft for the bail-out fund requirements that amounts to a take-it-or-leave-it offer which likely will be presented to Greek officials today. The proposal is expected to include higher demands for tough reforms of Greece’s pension system, labour laws as well as considerable budget measures to ensure that Greece runs a fiscal surplus before interest.
Amid the higher-than-expected euro-zone inflation prints yesterday, news/speculations of a Greece-creditor proposal drove large movement in core rates markets. The sell-off later spread to global debt markets and equity markets with most indices ending the day or currently trading (i.e. Asia) in red territory. The EUR has also strengthened significantly, in particular against the USD, which has seen EUR/USD jump more than 2% to a level above 1.1150.
US vehicle sales released last night surprised market estimates by reaching a 10-year high. The release supports our call for a Q2 rebound in US consumption growth after the disappointing Q1 and surprisingly weak April figures.
FX intervention figures yesterday showed that Danmarks Nationalbank purchased DKK in FX intervention for DKK35bn in May leaving the FX reserve at DKK658.9bn and accumulated intervention since the beginning of April at DKK68.9bn.
Australian Q1 GDP surpassed expectations at 0.9% q/q (consensus 0.7%).
FIFA President Blatter unexpectedly resigned amid a spreading corruption probe.
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