In the UK, the main event is the Supreme Court ruling
|Market movers today
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In the euro area, the PMI figures are due to be released. The PMIs have improved significantly over the past few months in both manufacturing and services. However, the leading PMI indicators show more mixed signals. In line with other survey indicators, we still expect manufacturing PMIs to increase, but less than in previous months. Note also that the input/output prices increased significantly throughout 2016, and could start to flatten as commodity prices are stabilising. With regard to leading service PMIs, future business expectations increased significantly in December while the new business indicator remained stable. Thus, we expect service PMIs to see a further increase in January.
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Today, the US PMI index brings us the first indications on 2017 activity. The manufacturing PMI index rose again in December, reaching 54.3 up from 54.1 in November, the highest level in almost two years. It seems as if the manufacturing sector ended 2016 on a strong footing and we expect the current trend to have continued into 2017, although we are still waiting for ‘hard data' to confirm this. We estimate the Markit manufacturing PMI index has stayed more or less unchanged at around 54.3 in January.
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In the UK, the main event is the Supreme Court ruling. According to a previous story in The Guardian, 11 January 2017, the UK government expects to lose the appeal. Based on Theresa May's speech, it seems as if she has accepted that parliament needs to be involved in the negotiation process, as she mentioned the final deal will be put to a vote in both Houses of Parliament. For more details on May's speech, see Brexit Monitor #21, 17 January.
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The Italian constitutional court will hold a hearing today regarding the new electoral reform for the lower house. The outcome could become a market mover as the expectations of a snap election may increase despite the outcome. Increased expectations for a new election would not be positive for Italian government bonds.
Selected market news
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While Trump's inauguration speech did not contain much further insight into his economic policy, the first business day in office did. As one of his first actions as the 45th president of the US, Donald Trump signed an executive order to withdraw the US from the Trans Pacific Partnership (TPP). Trump is likely to keep his ‘tough on trade' approach and squeeze Mexico (and Canada) further with NAFTA seemingly next on his ‘renegotiation' agenda.
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The US's withdrawal from the TPP initially sparked negative risk sentiment, with leading US equity indices dropping and Treasury bonds rallying in the earlier parts of the US session (albeit reversing some later). The morning activity in Asia has been much more muted, with Hang Seng gaining slightly, Nikkei losing a bit, Japanese government bonds fairly unchanged and the dollar appreciating on the margin.
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