Flemming J. Nielsen
Danske Bank A/S
Market movers today
Developments in the Ukraine crisis remain the main market mover and it seems no news is good news, giving way to a further rebound in risk assets. However, a reescalation could turn around risk appetite fast.
Both Bank of England and the Fed release minutes. In the minutes from the Bank of England meeting in July the market will focus on whether the committee voted unanimously. Speculations of a dissent in voting have especially been fuelled after BoE governor Mark Carney on Sunday night said that the central bank could hike rates before wages increase.
Minutes from the latest Fed meeting could also prove interesting. It was the meeting where the Fed made a hawkish twist on inflation and lifted the end-2016 projection from 2.25% to 2.5%. Also, comments after the meeting suggest that the committee turned more hawkish. Fed hawk Richard Fisher said in an interview that the reason he did not dissent was because he saw movement in the committee in his direction.
Selected market news
The slightly positive risk sentiment appears to be intact, albeit Asian stock markets are mixed. Data released yesterday suggest that headwinds from the housing market are easing in the US and the subdued inflation data in both the UK and the US imply that neither the Fed nor the BoE will be in a hurry to raise interest rates. US bond yields are largely unchanged overnight but the USD has continued to strengthen. EUR/USD and JPY/USD are trading 1.3308 and 103.15 respectively this morning.
In the Ukraine-crisis there appears to be some movement on the diplomatic front. Ukrainian president Poroshenko and Russian president Putin will meet on 26 August in connection with the Eurasian Customs Union conference in Minsk, which will also be attended by EU officials. In addition, German Chancellor Merkel has announced she will be in Kiev on Saturday for talks, see Reuters. Fighting in the two main separatist urban strongholds, Donetsk and Luhansk, appears to have intensified. The Ukrainian government appears to believe it can book a decisive victory soon and has little incentive to compromise the risk of a Russian response and the risk of intensification of the conflict remains high.
In Japan the foreign trade data released overnight showed that exports rebounded slightly in July to 3.9% y/y (consensus: 3.8% y/y) from -2.9% y/y in June, see Bloomberg. Import growth was also a bit stronger than expected in July but the overall picture remains that import growth has slowed markedly in the wake of the consumption tax hike in April, indicating subdued domestic demand.
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