Eurozone HICP inflation to show an increase

Market movers today

• The preliminary German inflation data have not changed our view that euro-area HICP inflation released today will increase slightly to -0.1% y/y in March from - 0.3% y/y in February mainly because of a less negative impact from energy prices. Yesterday’s German inflation data also suggest that there will be no substantial distortions from the early Easter in 2015 that could have pushed some of the usual seasonal price increases in connection with Easter into late March. Hence, we have adjusted our forecast for core inflation slightly lower and now expect it to stay unchanged at 0.7% y/y in March.

• Another important release today is euro-area unemployment, which we expect to have edged lower to 11.1% in February from 11.2% in January. In the US we expect Conference Board’s consumer confidence to have been broadly unchanged in March. Strong employment growth continues to underpin consumer confidence but both higher gasoline prices and lower stock prices have weighed a bit on consumer confidence in March.

• The deadline for reaching an agreement on limiting Iran’s nuclear programme in the current negotiations between the P5+1 countries (the five permanent members of UN Security Council + Germany) and Iran will officially expire today. It is possible that the deadline for reaching an agreement could be extended until after Easter. One of the major remaining issues is how fast the current UN sanctions against Iran will be phased out. This will be particularly important for the oil price. An agreement that opens up for fast elimination of UN sanctions and increased oil supply from Iran could put downward pressure on the oil price, whereas a breakdown in the negotiations will probably push the oil price higher.

• For more on Scandi markets see page 2.

Selected market news

Risk assets opened strongly this week with most major global indices moving higher yesterday and the large Asian indices trading in green this morning. The improved risk sentiment was initially sparked by the very dovish comments on Sunday from the People’s Bank of China (PBoC) governor and further indications that the Federal Reserve hiking cycle will be gradual. Sentiment in Asia was boosted further overnight by PBoC loosening property curbs (down payment requirements for purchase of second home reduced from 60% to 40%), a broadened sales-tax exemption in China, private sector lending figures from Australia and very strong business confidence figures from New Zealand.

Market focus is also on the oil price, which slid overnight on the back of the Iran nuclear talks resuming (see above). Meanwhile, the Iran-backed Houthi rebels in Yemen have seemingly shrugged off a new round of airstrikes from Saudi Arabia and the Shia militia group has now moved further into the Southern city of Aden. This increases the geopolitical risk of an escalation (i.e. ground intervention) in the Iran- Saudi Arabia proxy war although in the very near term it seems less likely.

Greece’s effort to secure new funding from its creditors has stalled with European officials criticising the proposals.