Market Movers

  • Based on the lower German HICP inflation figure, we have revised our euro HICP inflation forecast for December down to 0.3% y/y (from 0.5% y/y) and still up from 0.2% y/y in November. The downward revision reflects that we had expected food prices to increase, while we also expected a smaller impact from the oil price decline, as gasoline prices have remained somewhat resilient to the latest oil price decline. Our lower euro HICP inflation forecast also follows as the Spanish figure, which was released last week, was weaker than expected despite an increase of 0.3pp

  • Financial markets will keep an eye on the rising tensions between Saudi Arabia and Iran, which could raise concerns about a potential oil supply disruption.

  • In Denmark, Danmarks Nationalbank is scheduled to publish December’s FX reserve today at 16:00 CET. See Scandi markets, page 2.


Selected Market News

Financial markets got off to a rough start to the year following a disappointing Chinese manufacturing PMI release and rising tensions between Saudi Arabia and Iran, raising concerns of the combination of a further slowdown in Chinese economic growth and a potential oil supply disruption. Consequently, equity markets in Europe and US declined 2-3%, crude oil prices temporarily rose as much as 4% yesterday and the gold price increased more than 1%.

Fed officials Mester and Williams spoke yesterday and both dismissed market turmoil as a concern for US economic growth, which both expect to be sound this year. Furthermore, Williams said that he expected the Fed to hike three to five times this year.

The People’s Bank of China conducted its largest reverse repurchase operation since September 2015 earlier today in order to add liquidity to the market cap and upward pressure on money market rates.

On a local note, the Riksbank yesterday announced that it has taken the decision formally to be able to instantly intervene in FX markets if necessary. This should be seen as a complementary monetary policy tool to the preferred tools, i.e. interest rate and bond purchases. The Riksbank thereby further underscores its commitment to reaching its inflation target and signals to markets that it will not allow a SEK appreciation to jeopardise this task.

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