Market movers today
There is a relatively quiet week ahead in terms of data releases, including today.
In the euro area, we get numbers for the Sentixinvestor confidence today, which we expect to decline slightly to 27.6 in August from 28.3 in July. While business activity and economic confidence remain high, euro area PMIs did decline last week. Together with recent months without gains in the major stock indices, it poses the question of whether we have reached the top. A robust argument is the stronger EUR, which we expect to drag on the euro area growth out look and become a headwind to inflation in the coming years.
German industrial product ion for June is also due for release today. The previous five months showed consecutive monthly growth in industrial production, with the figure for May showing 1.2%. We expect the June figure to be 0.5%. We expect industrial production to continue showing strong figures for Q3, as in Q1 and Q2. German business confidence is high and we continue to see strong activity levels for companies, which supports growth in indust rial production.
In Denmark and Norway, we get industrial product ion data today. For more see the Scandi section on page 2.
Selected market news
On Friday, the US jobs report came out better than expected with a fall in the unemployment rate and unchanged wage growth (against expectat ions of a drop). In our view, the jobs report supports our view that the Fed will announce " quantitative tightening" in September and hike again in December, given that the Fed tends to put most weight on the unemployment rate. However, we think risk is skewed towards the Fed pausing its hiking cycle, as wage growth and inflation are low. See also Flash Comment US: Fed likely to continue tightening on strong jobs report, 7 August .
On Saturday, the UN Security Council passed a resolution imposing new economic sanctions on North Korea, which aims at reducing North Korean exports by USD1bn (a third of its total exports) by targeting North Korea’s primary exports, including coal, iron, iron ore, lead, lead ore and seafood. See also CNN.
In the UK, The Telegraph reported that the UK is ready to pay a divorce bill of EUR40bn (against the EU’s estimates in the range of EUR60-100bn) but only if the EU starts negotiations about the future relationship. A Downing Street source later denied the story, see The Guardian. In our view, the divorce bill remains the biggest obstacle to the Brexit negotiations, not least given the weak minority government in the UK. Previously, the EU’s chief negotiator Michel Barnier had said the negotia ions were proceeding too slowly, meaning that negotiations in phase 1 (divorce bill, citizens’ right s and Irish border) may not be concluded in October as hoped for.
