This week kicks off with inflation figures

In focus today

Today's focus turns to inflation figures from Denmark and Norway. We forecast Norway's core inflation to come in at 3.0% y/y (prior: 3.1%), while Denmark's CPI is expected to register at 1.7% y/y (prior: 1.9%).

As summer winds down, this week brings several key data releases. On Tuesday, focus shifts to US July CPI, the Reserve Bank of Australia's rate decision, and the German August ZEW. Thursday brings the Norges Bank meeting, while Friday concludes the week with retail sales figures for the US and China.

Economic and market news

What happened over the weekend

In the US, Fed's Bowman was on the wire reiterating her support for three interest rate cuts in 2025, citing a weakening labour market with rising unemployment and easing inflation risks.

In the Ukraine-Russia war, President Trump announced plans to meet President Putin in Alaska on Friday, 15 August, to discuss a potential peace deal. Late on Saturday, European leaders issued a joint statement emphasising that Ukraine must be included in any negotiations and reaffirmed their opposition to territorial concessions.

In Sweden, production data showed growth, aligning with preliminary GDP data. Manufacturing production bounced markedly by 12.8% y/y, which will likely reverse in coming months. Household consumption increased by 0.6% m/m, in line with expectations and figures for retail sales. However, the outlook remains weak heading into autumn, with risks still tilted to the downside.

In China, July's producer price index dropped by 3.6% y/y (cons: -3.3% y/y), while CPI data came in flat (cons: -0.1%), according to the National Bureau of Statistics. The NBS chief statistician attributed the price declines in certain industries to extreme weather and global trade uncertainties.

Equities: Friday concluded a strong week for equities. US led the gains, with S&P 500 closing 0.8% higher and Stoxx 600 a meagre 0.2%. This summarized to a 2-2.5% advance for the week for most regions, including risk on dynamics: Cyclicals beat defensives by 2p.p. and growth outperformed value. As such, equities have recouped the losses from the non-farm payroll surprise two weeks ago. US gains were concentrated to the Mag 7 names, with small caps underperforming for the fourth week in a row. Small caps have done considerably better in Europe. Following three years of underperformance, small caps have outperformed large caps by 4p.p. so far this year.

European and US markets performed on par last week. Equal weighted S&P 500 was even -0.5% lower, so from a median perspective, European markets did substantially better. From a median stock performance perspective, US and European markets have not diverged much the last month. This flies with the macro input: European momentum is stronger than in the US (visible in Citi's Economic Surprise Index). This has been balanced by a stronger earnings trend in the US (helped by FX). Instead, the big delta in the European and US performance has been sector composition, leaving S&P 500 2.5 p.p. better off during the last month. US big tech preference is partly due to strong earnings but has also been helped by a 15bp drop in yields from the US job revisions.

FI and FX: Global yields drifted higher into Friday's close. In the US, Treasuries ended the week roughly 3bp higher across the curve, with the market holding on to last Friday's post-jobs report rally. In Europe, the German 2Y yield rose 3bp, while the 10Y and 30Y Bund yields gained 5bp, resulting in a mild curve steepening. In FX, GBP was the standout G10 performer last week following the hawkish BoE cut, while safe havens CHF and JPY were the two weakest performers. CHF underperformed as Switzerland has yet to secure a trade deal with the US in the wake of the substantial 39% tariff. JPY weakness was partly driven by diminished prospects for another BoJ hike after real wages declined more than expected. NOK also struggled, weighed down by oil prices hovering near year-to-date lows. EUR/USD has consolidated in the 1.16-1.17 range ahead of tomorrow's US CPI print.