No changes from BoJ and focus on Moody's review of Italy

Market movers today

Markets will continue to digest the outcome of yesterday's UK parliament vote on extending Art.50. Unless a deal is reached at the EU summit on 21-22 March, calls by UK politicians for a longer rather than short extension are likely to grow louder.

In the euro area, we get the final February HICP figures. The preliminary print showed headline inflation increasing to 1.5% y/y from 1.4% y/y in January, while core inflation disappointed at 1.0% y/y from 1.1% y/y in January. We are particularly interested in the drivers of this fall in core inflation, since the continued absence of transmission from wages to consumer prices is becoming an increasing worry for the ECB.

The day also brings data on new EU car registrations for February. Developments in the auto sector remain in focus with production hampered by new emission test standards in autumn and we look for a continuation of the recent months' rebound.

In the US, industrial production is expected to edge higher in February, while the Empire index will give us some hints on how the manufacturing sector fared in March, after some signs of weakness in recent months. Finally, consumer sentiment from the University of Michigan is expected to continue its recovery in March after the dip during the government shutdown, boding well for consumer spending.

There is a string of possible rating reviews. Moody's could update Italy's rating. S&P has Finland, Austria and Portugal up for review. Fitch has Norway up for review.

Selected market news

After another dramatic night in the House of Commons, a majority voted to postpone Brexit. If the House of Commons votes to pass May's deal next week, it would be only a short extension, otherwise a long extension may be in the cards. Remember that the EU27 has to grant the extension unanimously, so the response by the EU leaders will be interesting. The EU summit takes place on Thursday-Friday next week.

There was no change from the Bank of Japan this morning. Its QQE was maintained with yield curve control and its forward guidance was unchanged at the meeting which ended this morning in a 7-2 vote. It was one of the small meetings, so no new projections were given for growth and inflation. The BoJ changed its assessment of Japan's economy somewhat. It now recognises that "exports and production have been affected by the slowdown in overseas economies". It kept the sentence that "Japan's economy is expanding moderately" unchanged, though, which highlights that the BoJ expects the global slowdown to be temporary and the recent weak Japanese export figures to bounce back once a trade agreement has been reached between the US and China. Hence, the BoJ is still in a wait-and-see mode.

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