ECB Following Its Renewed Focus On Growth
Market Movers Today
It will be a fairly thin data calendar today, where the main release will be German ifo expectations. The decline in the German manufacturing PMI suggests the ifo expectations index will decline and, in our view, there is downside risk to consensus expectations. Although the figure is expected to remain at an elevated level, a cont inued downward t rend could support a softer tone from the ECB following its renewed focus on growth.
US Conference Board consumer confidence is due for release in the afternoon. The figure is expected to decline in line with other indicators for consumer confidence but to stay at a high level. Overall, t he optimism expressed in t he survey indicators aft er T rump’s victory is likely to continue to fade in coming months.
Please note we have published our FOMC preview ahead of the meeting on Wednesday. We expect the Fed to maintain the Fed funds target range and wait until September to make an announcement on ‘quantitative tightening’. See FOMC Preview – No major changes, 24 July 2017.
In the Scandies, the quarterly SSB Industrial Confidence release in Norway is due. In Q1, the manufacturing index returned to positive territory for the first time since Q3 14. We expect a further rise today, which would be in line with the signals from, e.g. the manufacturing PMIs, hinting at a re-acceleration in manufacturing product ion in 2017. In Sweden, the monthly PPI release will give us more insight into the inflation dynamics, which are important for the Riksbank.
Selected Market News
It was quiet overnight with most Asian equity indices roughly flat this morning. In currency markets, EUR/USD failed t o break through Friday’s low as a rebound erased yesterday’s losses, highlighting currency markets’ current predisposition to buy the single currency. Oil has moved a little higher after Saudi Arabia promised yesterday to cut crude oil exports further in combating low oil prices. Otherwise, the key takeaway from the OPEC meeting in St . Petersburg was rising frustrations from Saudi Arabia and Russia with other countries’ falling compliance with the current output cuts. Fundamentally, we st ill think OPEC has lost control with the oil curve amid increased global competition and we at tribute the past month’s rise to a weaker USD, better-than-expected Chinese data improving the global demand out look and US producers adjust ing product ion (see rig count chart).
In the US, yesterday’s PMI release saw the manufacturing index surprise posit ively by rebounding to 53.2 (consensus: 52.3) while the service index met expectat ions at 54.2 – both pointing to further expansion. The manufacturing index has over the past months painted a less upbeat picture than ISM manufacturing and as such, we regard part of yesterday’s rebound as convergence. Overall, the US PMI package suggests a decent start to Q3 with GDP growth around 2%, which is more or less in line with our own project ions.
In Greece , the government has out lined a plan to return to debt markets for the first time since 2014, as a 5Y bond will prove an important market test . The announcement follows S&P ‘s decision on Friday to upgrade its Greek debt out look from ‘stable’ to ‘positive’.
