ECB’s Praet speak s at 11:45 CET

Market movers today

  • In Norway, Norge s Bank’s gove rnor Olsen is making his annual addre ss at 18.00 CET, which will be interesting, not least as Norges Bank has made a U-turn from signalling further rate cuts to indicating a rate increase within a year (page 2).

  • In the US, we get PPI inflation data for January, which might attract more attention than usual after the higher-than-expected CPI inflation print released yesterday.

  • Also in the US today, we get production data for January and Empire and Philly regional manufacturing PMIs for February.

  • The Chinese financial markets are closed from today and until 22 February for the Lunar New Year.

  • ECB’s Praet speak s at 11:45 CET.


Selected market news

The US CPI was the highlight of data points yesterday. Overall the strong CPI core 1.8% yoy (close to 3% annualised in the last three months), supports the case for the Fed to move forward with further rate hikes. Albeit , retail sales were weaker than expected. Over the day as a whole, risk sentiment was supported despite an initial knee-jerk on the US CPI. Global equities rose across the board. Asian equities followed the pattern by rising 1-2% in the overnight session. S&P 500 rose 1.4% as eurostoxx rose 0.9%, while the volatility index VIX fell rapidly after the knee-jerk reaction to the US data and ended around 19.3. The yen strengthened again yesterday. The treasury yields ended the day 7bp higher at 2.90%.

South African now former president resigned yesterday with immediate effect . ANC leader Cyril Ramaphosa will replace Zuma.

Euro area Q4 growth was confirmed at 0.6% q/q as expected. The flash release of Germany and Italy were also released. German Q4 17 growth came in as expected at 0.6% q/q, mainly due to strong foreign demand and a pick-up in exports. This leaves annual growth in 2017 at 2.5% and we expect the German economy to continue running on all engines. The Italian Q4 growth disappointing slightly at 0.3% q/q after 0.4% q/q in the previous quarter, despite the high manufacturing PMIs. This leaves annual growth in 2017 at 1.5%.

Yesterday, the Riksbank chose to reduce inflation (in part icular CPIF ex energy due to lowerthanexpected wage increases) and GDP forecasts (now recognising that housing const ruction activity will decrease more than expected previously) while keeping the repo rate unchanged. We have elaborated with a base Riksbank scenario (no rate hikes this year) and a not improbable alternative scenario (one or possibly two hikes then a pause for a year or so). Admit tedly, it looks like a close call. That the Riksbank is sticking to the rate path despite lowering the inflation forecast could be taken as hawkish but , in our view this is not really vindicated by the policy report . This suggests that the Riksbank was close to delaying the first hike. For now, we stick to our base case as the most probable but the minutes published on Friday next week will be of the essence just like the coming inflation data.

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