In the euro area the only major release is May factory orders in Germany

Market movers today

• A bit of an anti-climax today after yesterday’s flood of important news. The US markets are closed for Independence Day celebrations and outside Scandinavia we have a very light calendar.

• In the euro area the only major release is May factory orders in Germany. We expect a drop, partly reflecting a payback on the strong factory orders in April. However, recent manufacturing surveys suggest that the German manufacturing engine has lost some steam in recent months.

• It possible that Moody’s will announce a rating decision on Belgium (current rating is AA3 stable) and Fitch could announce a rating decision on the European Financial Stability Facility (current rating is AA+).

• In Sweden industrial orders and production data are released at 09:30 CET. For more on Scandi markets see page 2.

Selected market news

The US job report for June released yesterday was stronger than expected, showing job gains of 288 in June (consensus 217K, DBM 225k ) and the unemployment rate declined to 6.1% in June from 6.3% in May (consensus 6.3%, DBM 6.3%). However, wage inflation eased to 2.0% y/y from 2.1% y/y in May and as long as wage growth remains subdued the Fed will probably not be too concerned about the fast decline in the unemployment rate. We look for job growth to rise gradually to 250k-300k in H2 as growth picks up further steam. As core inflation is also bottoming out and housing is expected to recover, this will likely lead to less dovish talk from the Fed during the autumn and more risk premium in the US money market curve. US equities, interest rates and the US dollar increased yesterday following the strong job growth, which suggests that the consensus 3.5% q/q (annualised) GDP forecast for Q2 is still achievable and some upside risk to the 3.1% q/q consensus forecast for GDP growth in Q3.

Yesterday’s ECB meeting contained much more information than we had expected. Most importantly, the ECB published technical details of the TLTROs (see ECB’s press release), which appear to be more attractive than initially expected and on the margin this increases the potential liquidity injection. Moreover, the ECB announced that it will change the frequency of its monetary policy meetings to a six-week cycle from January 2015 and at the same time, the ECB will start to publish minutes of the monetary policy meetings. For more details on the ECB meeting see The ECB reduces number of meetings and provides TLTRO details, 3 July.

While the ECB meeting contained a lot of information, the reaction in EUR rates was limited. A much bigger impact was seen in the government bond markets where periphery markets rallied strongly despite upward pressure on core rates following the strong US job report.