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Jens Peter Sørensen
Danske Bank A/S
Market movers today
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Inflation releases are a key focus today in the Scandies as well as the US, while geopolitical issues also will continue to be a key market issue.
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While July headline inflation in Denmark is set to decline due to base effects, it will increase modestly in Sweden to 2.3% (from 2.2% in June), while the increase will be more pronounced in Norway rising from 2.6% in June to 2.9% in July.
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US CPI core index likely rose +0.2% m/m in line with the recent trend, leaving the inflation rate unchanged at 2.3% y/y
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The first estimate of UK GDP growth in Q2 is due out today, which we expect to show that growth rebounded to 0.4% q/q from 0.2% q/q in Q1.
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In the emerging market space, look out for developments in the relationship between Russia and Turkey on the one side and the US on the other, in relation to the recent US sanctions against the two countries, which has caused a slump in their assets.
Selected market news
The Turkish lira continues to be under pressure and lost more than 5% against the dollar yesterday, given the political tensions between Turkey and the US and the lack of progress in diplomatic talks between Turkish officials and US officials. Hence, the market is looking for central bank action in Turkey in order to stem the lira s slide. Furthermore, the CDS on Turkish government debt has risen more than 200bp and is now very close to the levels for the CDS on Greece. Hence, the price for hedging Turkish debt has become very expensive in recent months.
US government bond yields declined even though the 30Y US Treasury auction was a bit 'soft'. However, given the soft PPI data and solid demand for Treasuries, 10Y yields have declined some 3bp. The bond market also 'ignored' comments from one of the Federal Reserve bank 'doves', Chicago Fed President Evans, who stated yesterday that the Federal Reserve may need to raise interest rates to 'somewhat restrictive' levels to combat the recent stimulus.
Most of the Asian stock markets slipped this morning on the back of the ongoing trade conflict between the US and China as well as sanctions on Russia. The geopolitical tensions continue to set the tone for the markets.
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