Danske Research Team
Danske Bank A/S
Market movers today
Focus continues to be on the developments in Ukraine after authorities in Kiev announced the start of an ‘anti-terrorist operation’ against pro-Russian separatists.
In Europe the main releases are final CPI for the euro area and unemployment in the UK. We expect the final reading on inflation to remain unchanged at 0.5% y/y, although a downward revision cannot be completely ruled out. UK unemployment is set to decline and consensus expectations suggest a 7.1% reading.
In the data calendar the main focus in the US will be the release of housing starts, building permits and industrial production for March. We expect to see a weather-related rebound in housing starts, albeit the weak NAHB house market index suggests that recent soft data for the housing market are not just due to bad weather.
Fed chairwoman Janet Yellen will speak in the Economic Club of New York followed by a Q&A session. The main topic is expected to be monetary policy unlike the brief speech yesterday that mainly covered regulatory issues. We expect Yellen to be dovish and not least attempt to decouple Fed’s tapering and interest rate decision. Fed is also scheduled to release the regional Beige Book survey of the US economy this evening.
Q1 earning reports will continue to be in focus with among others Credit Suisse, Bank of America, American Express, Google and IBM reporting today.
Selected market news
China’s GDP growth in Q1 14 eased to 7.4% y/y from 7.7% y/y, confirming that growth has slowed albeit a little bit less than expected. Industrial production in March accelerated slightly to 8.8% y/y from 8.6% y/y in February. Other data released point to the current slowdown being mainly driven by weaker investment demand in the wake of the government’s attempt to contain credit. It remains our view that the Chinese economy will stabilise in the coming months and improve in H2 14, even though the weak credit and money supply data released yesterday so far do not signal any substantial recovery in H2 14.
The European parliament yesterday passed the key laws reforming the euro-zone’s banking sector including the legal framework for the banking union and the package on capital requirements (CRD IV). According to FT this was the biggest set of financial rules passed in the EU since the single market.
Risk sentiment yesterday was a mixed picture with the evolving situation in Ukraine weighing on European equities. However, after European markets closed and no further developments in Ukraine after earlier reports of security forces starting to move to evict Russian-backed separatists from government installations, US stocks rallied back to end with modest gains again.
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