The Brent crude oil price has also lost some of its gains

Market Movers

• Today’s calendar of economic data releases is dominated by US data that will tell us more about how the US economy is doing. The main theme in the US economy is the slowdown in the manufacturing sector and the concomitant steady growth in the service sector, which has left economic policy makers in a difficult position.

• Today we get US-figures on industrial and manufacturing production. The manufacturing sector is struggling due to a combination of the strong USD, the slowdown in manufacturing globally and the slowdown in the US energy sector. While the lower oil price has lowered input costs, it has also hit demand for US manufacturing goods as the energy sector is a large buyer of them. The latest ISM figures on manufacturing have been very weak and hence we are not too optimistic on the ‘hard’ manufacturing data.

• Also due for release today are figures on US private consumption, namely the University of Michigan consumer confidence and retail sales. We expect solid releases due to growing real income, rising consumer confidence in previous months and a boost to consumers’ purchasing power from the lower energy prices. The Fed’s Dudley (voting member, dovish) will hold a speech on the economic and monetary policy outlook in the US. We will also get US PPI figures.

• In the UK construction output figures for November are due. The figures should give us more insight into how the UK performed growth-wise in Q4.

• Today the International Atomic Energy Agency is expected to report that Iran has fulfilled its commitment under the nuclear agreement, which could lead to the decadelong sanctions being lifted as early as Monday.

Selected Market News

Yesterday afternoon the Fed’s Bullard – who is regarded to be in the hawkish camp of the voting members – expressed concern as to the downtrend in inflation expectations. Specifically he stated that the ‘latest decline in oil prices may delay the return of inflation to central bank’s 2% target’ which would require a ‘rethink’ of monetary policy. While Bullard still said that the base case remains four rate hikes in 2016 the fact that he expressed concern, shows that the Fed is paying close attention to the tumbling start to the year in terms of commodity prices and risk assets. Bullard’s comments offered relief to risk appetite in the US session which, together with the rising oil price, contributed to sending the major US stock index higher. While Asian stocks started the overnight session on a good footing, most Asian indices, however, are now in red territory. The Brent crude oil price has also lost some of its gains and is now back below the USD31/bl-level around which Brent has been fluctuating this week.

IMF fund spokesman Gerry Rice stated that the process of the Yuan joining the Special Drawing Rights is ‘fully on track’. For the sixth straight session the USD/CNY fixing was held stable and the CNY-CNH spread still remains in a relatively tight range. Overnight Chinese credit figures surprised heavily to the upside and showed that companies increasingly turn to the corporate bond market.

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