Oil prices continued to recover overnight

Market Movers

• Although we have postponed our expectations for a first BoE hike to Q1 17, we are still monitoring the key economic figures closely. We expect that CPI inflation (due on Tuesday) increased to 0.4% y/y in January, mainly due to base effects and that CPI core inflation being unchanged at 1.4% y/y.

• Today , the German ZEW expectations for January are due to be released. Due to increased global market uncertainty, we expect the figure to drop sharply. This is also in line with the decrease in the Sentix expectations, which also reflects investor confidence, and is usually a good leading indicator for the ZEW expectations. If this market uncertainty persists, it could end up being a drag on economic growth in 2016 and, in that case, we would have to revise our forecast of a reacceleration in growth.

• In the US, focus will be on Empire manufacturing and the NAHB housing index.
  

• In Scandinavia, focus will be on Norwegian GDP, where we expect growth to be flat q/q. See Scandi markets, page 2, 16 February 2016.

Selected Market News

Oil prices continued to recover overnight and Brent is now trading just below USD35 a barrel since Thursday’s low. Risk appetite is better and there are media reports that Saudi’s influential oil minister, Ali al-Naimi, will meet with his colleagues from Qatar, Russia and Venezuela today in Doha to discuss possible production cuts to bolster the oil price. It is doubtful whether any agreement can be reached. As late as last week, Russia said it would defend its market share. But given the current price oil level and the more positive risk appetite this week, we could still see some upside for oil today. Higher oil prices could also add some upside to inflation expectations in the market. Despite the rally in risk appetite yesterday, 5Y5Y inflation swap market inflation expectations are still close to the bottom both in the euro area and the US.

The positive market sentiment from the US and European session has been carried over to Asia and many markets are heading for the biggest two-day gains since 2010. Chinese stock markets have taken the lead up more than 3% after new data showed that credit and money growth were very strong in January. Both ‘aggregate financing’ and ‘new yuan loans’ were much higher than expected, according to surveys conducted by Bloomberg. The data is by most analysts seen as supporting a recovery in the Chinese economy and a consequence of both monetary policy and government pressure on banks to step up lending, though some of the jump in yuan loans is likely to be due to banks moving funding in foreign currency to local currency.

The positive market sentiment from the US and European session has been carried over to Asia and many markets are heading for the biggest two-day gains since 2010. Chinese stock markets have taken the lead up more than 3% after new data showed that credit and money growth were very strong in January. Both ‘aggregate financing’ and ‘new yuan loans’ were much higher than expected, according to surveys conducted by Bloomberg. The data is by most analysts seen as supporting a recovery in the Chinese economy and a consequence of both monetary policy and government pressure on banks to step up lending, though some of the jump in yuan loans is likely to be due to banks moving funding in foreign currency to local currency.

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