Christin Tuxen
Danske Bank A/S
Market Movers
A few ECB appearances scheduled with both Lautenschlaeger and Weidmann set to speak today. After ECB chief economist Praet was out last week stressing that rate cuts remain part of the ECB toolbox, the other German members of the ECB Governing Council will be listened to for any clues regarding ECB preferences for QE versus rates if more easing is needed from here.
Scandi markets will be watching the Swedish releases with NIER data on business and consumer confidence as well as its outlook for the Swedish economy, see Scandi Markets.
Selected Market News
While the euro-zone releases yesterday generally came out on the strong side, the Brussels attacks weighed on sentiment: equities were sold off with notably airlines being dragged lower and in the fixed-income markets German bonds were in demand. Gold also rose and JPY, CHF and USD crosses appreciated notably against EUR and GBP as Brexit risks again moved to the fore. The haven demand gradually faded during the day though, and equity markets ended the day mixed in both the European and US sessions while Asia is generally lower this morning.
Although the US Markit PMI yesterday came in lower than expected, rising to 51.4 in March (from 51.3 last), at the same time the rise in the Richmond Fed index added to the picture from both the Philly Fed and Empire surveys of a US manufacturing sector that is starting to recover more broadly. Thus, we could soon see the ISM manufacturing index rise above the 50 boom/bust level when released early April, see chart. Regarding sentiment towards the US, it is worth noting the relatively hawkish comments from the usually rather dovish FOMC’s Evans last night: while he remains worried insofar as the inflation outlook is concerned, he noted that two rate hikes this year is a realistic setting in his view. Markets have continued to up expectations about Fed hikes in 2016 after a mid February low, notably now pricing in more than 50% probability of a June hike. We still look for merely a September hike this year but current Fed pricing looks increasingly reasonable given the continued stream of better US data.
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