The oil price is slightly higher with Brent trading

Market Movers

• The G20 finance minister and central bank governors’ meeting has started. Earlier this week, the IMF called for ‘a strong policy response, both national and multilateral’ if downside risks materialise, while the OECD now also calls for an urgent policy response as global growth fails to pick up. In our view, we have not reached a stage of market turmoil that would trigger a global co-ordinated policy response but we will be watching the G20 meeting.

• In the euro area, the first release of inflation in February is published with the German, French and Spanish figures. In Germany, we expect a decline from 0.4% y/y to 0.0% y/y mainly because the yearly inflation rate in energy prices will head lower, although the oil price in monthly terms has increased a bit from the lows in January. The move in the German figure should overall be in line with the aggregate euro-area inflation rate although we look for a smaller aggregate decline.

• In the US, core PCE inflation, which the Fed targets, is due for release. US inflation also continues to be subdued and we expect core PCE increased 0.1% m/m in January bringing the yearly inflation rate to 1.5% from 1.4%. Note that core CPI surprised on the upside in January bringing the yearly inflation rate to 2.2%.

• US consumer spending should show a strong gain in January in line with retail sales. The strong retail sales followed despite falling equities and somewhat weaker consumer confidence (though still at healthy levels). We estimate that overall consumer spending was up 0.5% m/m with personal income increasing 0.3% m/m.

• The Irish election will likely result in some weeks of political uncertainty, see page 2.

• In Norway unemployment figures are due for release and in Sweden retail trade data are published, see Scandi Markets.

Selected Market News

The risk-on sentiment continues with most Asian equities trading higher. The positive sentiment was supported by comments from People’s Bank of China governor Zhou Xiaochuan that ‘China still has some monetary policy space and multiple policy instruments to address possible downside risks’ although he sees the current policy as ‘prudent with a slight easing bias’, confirming earlier reassurances that the country would not support the economy by another currency devaluation. US stocks rose yesterday with S&P 500 back at levels not seen since the start of the year. The moves were supported by strong durable goods orders in January. Core capex orders rebounded in January and rose 3.9% m/m, which is the highest increase since mid-2014 but only reversing the 3.7% decline in December. The oil price is slightly higher with Brent trading around USD35/bl but inflation markets continue to suffer. ECB’s preferred measure for inflation expectations, the 5Y5Y inflation swap, has been on a downward trend since the disappointment at the ECB meeting in December last year and is now below 1.4%. Draghi expressed concern about the measure when it declined below 2% in 2014 and the continued decline puts pressure on the ECB ahead of its meeting on 10 March.

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