A rebound in today's US retail sales is key for growth recovery to remain intact

Market movers today

• The main release is US retail sales for March. It is important we see a rebound to keep expectations of a growth recovery intact. Retail sales have disappointed in the past months and are part of the reason why US Q1 growth is tracking only around 1% currently. We do indeed expect a robust rebound in March as February sales were held down by bad weather and fundamentals for consumers are quite strong currently: gasoline prices are low, wealth gains strong and the employment growth is solid.

• The US also releases PPI and NFIB business optimism but these are less important.

• In the UK inflation data for March will reveal whether the UK has fallen into deflation or not. We expect that this was not the case as we estimate inflation was unchanged at 0.0% y/y. Higher fuel prices in March are expected to compensate for the price cuts announced by the largest British gas companies. We expect core inflation to have remained unchanged at 1.2%.

• In the Scandi markets, Swedish March inflation data take centre stage.
  

Selected market news

The Greek government is raising the stakes in debt negotiations. According to Financial Times, Greece has decided to withhold EUR2.5bn of payments due to the IMF in May and June if no deal with its international creditors is reached by end-April. However, warning of what would effectively be a debt default could also be a negotiating tactic, aimed at extracting better terms from Greece’s creditors. In any case, although the report was later denied by the Greek government, it is likely to have contributed to the sell-off in Greek government bonds yesterday, which widened 35bp in the 10yr segment.

ECB asset purchases remain on track. Yesterday’s data on asset purchases showed that ECB’s weekly asset purchases settled as of Friday amounted to EUR12.0bn (PSPP: EUR9.2bn, CBPP3: EUR2.5bn, ABSPP: EUR0.4bn). Since the turn of the month, ECB has thus increased its holdings under the expanded asset purchase programme by EUR18.4bn. This is equivalent to a daily run-rate of EUR3.1bn, implying that the ECB remains on track to meet its EUR60bn target in April. We also note that the launch of the PSPP has not reduced the ECB’s presence in the covered bond market. While the CBPP3 run-rate may decline over time due to the lack of eligible bonds, for now the ECB seems determined to maintain the pace of its private-sector asset purchases.

Sentiment sours somewhat during US session. US equities struggled to gain traction yesterday, as worries over corporate earnings came in focus. The strong dollar, lower oil price and weak consumer spending due to the winter weather may weigh on first quarter results and estimates have been revised sharply lower since the beginning of the year. The weak US session also appears to be weighing on Asian equities this morning. Furthermore, decision by the Monetary Authority of Singapore to keep rates unchanged despite widely held expectation for further easing has weighed on sentiment.