Market movers today
With a thin global calendar, focus is on Scandinavia inflation with the release of the Danish and Norwegian figures for April. The Danish figure should be unchanged but the Norwegian print is more interesting after weak inflation in recent months has prompted markets to shift the spot light from oil and growth to inflation. We estimate core inflation climbed to 1.9% y/y, well below Norges Bank’s projections in its last monetary policy report (2.1%) but this could still allay some of the fears that inflation will fall far enough to trigger further rate cuts.
In Sweden, the Riksbank minutes from the last monetary policy meeting will be released. The minutes will be followed closely as they cover the meeting when the Riksbank surprisingly decided to extend the QE programme. The Swedish Prospera inflation expectations are also due for release today.
ECB president Draghi is scheduled to speak in the Dutch parliament in the afternoon and focus will be on whether the latest jump in core inflation as well as Macron winning the French presidency have changed the ECB’s monetary policy stance. In our view, the elimination of the Frexit risk has paved the way for a more hawkish communication at the next ECB meeting in June, but regarding the inflation out look, we expect the ECB to await more information in judging whether the latest rise is due to the timing of Easter or higher underlying price pressure.
Selected market news
Former French prime minister, Manuel Val ls, has reported he wants to run under president-elect Macron’s new political movement i n th e upcoming parliamen tary election. Macron aims to put candidates up in all 577 constituencies and the candidates are expected to be announced on Thursday. the election out come will be decisive for how much of Macron’s policy proposals he can actually implement and the risk remains that Macron’s parliamentary majority will be unstable and fragmented, see Research France: Clouds lift over Europe after Macron wins presidency, 8 May.
Chinese PPI and CPI inflation figures have been released this morning and confirm our view that some of the engines fuelling reflation are losing steam. PPI inflation fell sharply to 6.4% y/y in April from 7.6% in March and below consensus expectations at 6.7%. Hence, it seems PPI inflation peaked at the beginning of the year when it was quite high due to the big increases in commodity prices in 2016. The peak in commodity price inflation was one of the reasons we believed the reflation theme was fading, see Research: Global reflation set to lose steam, 3 April.
US President Trump has fired FBI director James Comey at a time when the agency was investigating Russia’s i nterference in l ast year’s election, see Bloomberg. Democrats alleged it was an effort to cut short the Russia probe and demanded a special prosecutor to carry the process forward.
