Danske Daily - Political gridlock

Danske Research Team Danske Bank A/S

Market movers today

Judging by the country figures released already, euro area industrial production will probably show another dismal reading for November, in a sign that activity remained sluggish in Q4.

Chinese money and credit data will also be interesting as it should reveal that some of the monetary easing measures are feeding through to the economy. There have been some tentative signs of a bottom in money and credit growth in recent months.

Later this week, the Brexit vote in the House of Commons will become the big market theme, while negotiations around the ongoing US government shutdown - by now the longest on record - continue.

In the Scandies, Swedish inflation figures and house price statistics will take centre stage today. We estimate an inflation number 0.1pp below the Riksbank's forecast.

Selected market news

Downbeat sentiment in financial markets mark the start of the week. Asian stock prices are trading lower and oil prices have dropped back. There were no particular data releases or news headlines overnight to set the direction for markets. Rather, markets are likely to be anxious ahead of the vote on May's Brexit deal tomorrow and due to the lack of solution to the US government shutdown.

In Sweden, there was a positive development, as the Centre Party and the Liberals (previously part of the Conservative/Liberal 'Alliance'), agreed to form a minority government with Social Democrat Stefan Löfven as Prime Minister together with the Green Party. However, the gridlock has not ended yet, as the Left Party (Vänsterpartiet) has not said whether it will support this government formation or not. The vote in the Swedish parliament takes place on Wednesday but we may get more news later today.

On Sunday, the leader of the UK labour party, Jeremy Corbyn, vowed to call for a confidence vote on Prime Minister Theresa May soon. Also related to the UK and Brexit, on Friday, speculation started over whether Article 50 could be extended in the event that May's deal is voted down tomorrow.

With regard to the US government shutdown, it is now the longest on record after politicians did not manage to reach a deal on Friday. Over the weekend, speculation has arisen as to whether President Donald Trump would use his power to call a state of emergency and temporarily reopen the government while budget negotiations continue

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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