Market movers today
The new Italian government is set for a confidence vote in parliament today. Prime Minister Giuseppe Conte will be speaking at 11:00 CEST before the Senate and at 12:30 CEST before the Lower House. The vote is due to take place at 18.30 CEST and the government is expected to win by only a small majority in the Senate.
UK PMI service index for May likely rose to 53.5 from 52.8. We will also get final PMIs in the euro area.
In Sweden , April production data in various forms is due to be released: private sector, industry (and new orders) and services. Looking at survey data for guidance, these are mixed but on average suggest unchanged or lower growth. This would not be a surprise given declining European PMIs. The Swedish markets close at noon today.
In Norway , housing market data is on the agenda. The risk of a major setback for the housing market in Norway has gradually receded in the opening months of 2018. We estimate that prices rose a further 0.4% m/m in May.
Denmark is closed due to Constitution Day.
Selected market news
In the UK, PM Theresa May has decided to postpone the release of the government’s white paper on the future relationship with the EU until after the EU summit on 28-29 June. While this is not positive for the negotiations, it is not a big surprise either, as the UK and not least the Cabinet are still much divided on what the future relationship (especially with respect to customs) should look like, see Financial Times . The problem is that the next summit is in October, where the risk is that the UK and EU27 will need to agree on everything. UK companies expressed their concerns in a meeting held with Theresa May yesterday. The EU’s chief negotiator, Michel Barnier, still warns that much is at stake if the two sides cannot reach an agreement on how to resolve the Irish border issue by the end of the month, see Bloomberg . It remains our base case that the two sides will reach an agreement eventually but it may be much closer to the deadline before it happens and risks are increasing as time goes by.
We have updated our take on the US-China trade conflict, as things have got trickier over the past week. We think the risk of renewed escalation over the coming weeks has moved up and the key challenge is how Trump can satisfy a strong domestic call for tariffs on imports from China without China leaving the negotiations table. We still believe the ultimate solution will not entail a trade wall, but the probability that things will get worse in the short run is higher now. See US-China Trade Talks: Why things are getting tricky , 4 June.
The meeting between US President Trump and North Korea’s Kim Jong-un is now scheduled to take place on 12 June at 9am Singapore time. The US will continue its current strategy to isolate North Korea ahead of the meeting in order to put Kim Jong-un under maximum pressure, see Bloomberg . Trump’s aim still seems to be to persuade him to give up his nuclear plans in return for sanction relief but as we know from the trade conflict that this may not be as easy as it seems.
