Euro area economic confidence data for December is released at 16:00 CET

Market Movers

• Euro area economic confidence data for December is released at 16:00 CET. Consumer confidence has been trending downwards since March 2015 but unexpectedly improved in November. We expect another - albeit slight - increase in December to -5.4 from -5.9 in November. Note that although consumer confidence has been trending downwards since March, the indicator is still the highest it has been for several years.

• In Sweden, NIER is due to release the December business and consumer confidence surveys and a new economic forecast (released at 9:00 CET and 9:15 CET, respectively). We think it is especially important to monitor what businesses are saying about price plans. Danish consumer confidence also coming up (9:00 CET). For more details see Scandi Markets.

Selected Market News

The price of Brent crude oil continues to edge lower after yet another slide last week. This morning the Brent oil price broke below the 2008-low at USD36.20/barrel (on 24 December 2008) and fell to the lowest level since July 2004 at USD36.17/barrel, according to Bloomberg. As such, risk sentiment remains negative as focus has shifted from the Fed interest rate hike to the global growth outlook and as year-end is approaching. Hence, US equity markets traded lower on Friday with the SP500 index closing 1.78% lower, while trading this morning in Asia is mixed with Chinese equity indices trading in positive, while Japan is down.

The collapse in the oil price has been the biggest macro shock in the past one and a half years and while a lower oil price in isolation should be positive for US and European consumers and thus for global growth, the equity markets tell us that this might not be the case right now. We earlier flagged the risks to the US high-yield market and EM leverage from the lower oil price but the Fed could still hike three times next year with oil at current levels as long as data are strong. Hence, our view on higher short-end US rates and a modestly stronger USD versus EM and commodity currencies still stands even if we are wrong about the oil price stabilising. For more details.

In Spain the ruling conservative Popular Party (PP) became the biggest party in the 350- seat parliament in yesterday’s elections. However, the election outcome was very fragmented and there is no clear picture of who will take power as the only possible twoparty coalition is PP together with the Spanish Socialist Workers’ party (PSOE), which seems very unlikely. It might take some time before we get clarity about the new government and the uncertainty is likely to weigh on Spanish markets in the near term. Hence, expect yields on Spanish government bonds to widen relative to e.g. Italian bonds.

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