Allan von Mehren
Danske Bank A/S
Market Movers
Following the Fed meeting yesterday (see below) focus today will be on the weekly jobless claims. These have edged higher in the past week pointing to weaker activity and a softer labour market.
German CPI for January will give the first input to where Euro inflation (released Friday) will be this month. Consensus is a decline of -1.0% m/m (harmonised CPI) and increase in the annual inflation rate from 0.0% to 0.2%. The first Länder release CPI at 09:00 CET and the overall number for Germany will be published at 14:00 CET.
The first release of UK GDP for Q1 is due at 10:30 CET. We look for a rise of 0.5% q/q in line with consensus.
The EU Commission’s business and consumer surveys is expected to show a small decline but from an overall strong level.
In Scandi we get Swedish retail sales and unemployment and industrial confidence in Norway, see Scandi Markets.
Selected Market News
The FOMC statement yesterday was a slight disappointment for equity markets and stocks saw moderate declines, see Less ‘confident’ Fed likely to stay on hold in March as well, 27 January. The Fed did soften its language and mentioned that it was ‘monitoring global economic and financial developments’. It is also no longer ‘reasonably confident’ that inflation will reach 2% in the medium term. This sent bond yields lower. However, the overall tone of the statement was not as dovish as the equity markets had hoped for and the door is still kept open for a hike in March, although it is likely to come later (we look for an April hike). US stocks ended around 1% lower.
Following the market rout this year, investors are looking for central banks to step in and either ease or postpone rate hikes meaningfully. A continuation of Fed hikes - albeit postponed a bit - is a bit hard for the markets to swallow right now given the uncertainty about the oil price and China. Asian stocks are mixed but overall the moves are small.
A rise in the oil price yesterday has supported risk sentiment. Brent oil rose to USD33 per barrel after a story that Russia and its oil industry are discussing whether to work with OPEC on coordinating production.
IMF and World Bank are moving to forestall oil-fuelled defaults. They are heading for Azerbaijan to discuss an emergency plan in what could be a range of bailouts of oil-dependent countries suffering from the low oil price. According to FT IMF and the World Bank are also monitoring developments in countries such as Brazil closely.
The Chinese currency remains fairly stable. CNY has strengthened moderately and the USD/CNY fixing continues a slight drift lower. Today it was 6.5528, the lowest level in three weeks. It seems the measures taken in the offshore market over the past weeks have helped to dampen fears over a devaluation and thus capital outflows.
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