Allan von Mehren
Danske Bank A/S
Market Movers ahead
Focus will shift to the ECB next week after the US central bank stole the limelight in the past week. No change in interest rates is on the cards, but the central bank is expected to shed further light on European bank lending, which plays a major role in economic developments.
Industrial production figures are due for many countries during the week, including Germany and the Nordic nations. Hence, we will gain greater insight into the state of the manufacturing industry in northern Europe right now.
ISM for the service sector is the most important US data release in the coming week – we expect to see a small increase.
Global macro and market themes
Equities and other riskier assets have lost value over the past week despite stronger economic data from the US and China in particular. Nevertheless, we still expect equities to deliver sensible returns over 6-12 months.
The US central bank changed its tone on the risks currently faced by the US economy in its latest post-meeting press release. Given this, we expect that the first rate hike will come as early as next April. If our forecast holds, this will be somewhat speedier than what the market currently expects.
It will be interesting to see the reaction of long yields as rate hikes move closer in the US. Market liquidity is more than ample, which may tend to keep long yields down, as we saw in 2004-05 – the so-called bond yield conundrum.
Focus
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