Market movers today
A relatively quiet day once again on the data front, with the main release in the euro area being consumer confidence. The latest euro-area unemployment figures showed a decline in February to 9.5%, and such decent employment growth cont inues to support increasing consumer confidence, which we expect to see increased to -4.1 in April. Like financial and business sentiment , consumer confidence has also proved fairly resistant to political uncertainty, so we expect it to continue on an upward trend despite the uncertain political climate.
No major Scandi events are scheduled for today.
Selected market news
Markets calmed somewhat overnight following the upheaval in political risks over the past 10 days. The Fed’s beige Book last night painted a still relatively upbeat picture of the US economy, which was echoed by the Fed’s Fischer, suggest ing that the global economy is now more robust to tighter monetary policy. Moreover, strong Japanese export data out this morning is adding to global-growth sent iment . We stress, however, that our cyclical lead models paint an increasingly negat ive picture of the growth prospects across the US, Europe and Japan, and we would not be surprised to see a cyclical peak in especially the US in the near future. Oil prices dropped significantly on US data showing surging oil production and inventories. Equity markets have been mixed but energy stocks in particular are suffering as oil prices dropped on surging US production and inventories with Brent oil just above the USD53/bbl mark. Finally, a strong CPI print out of New Zealand, which saw inflation reach the 2% target for the first time in five years, has sent NZD/USD higher.
UK PM Theresa May received House of Commons’ backing for her 8 June election call yesterday, and GBP/USD is trading just off the 1.28 mark, levels not seen since October last year, with UK stocks suffering as a result . The election campaign is now on with the Tories maintaining a decent lead.
Yesterday in an interview with the FT, US Treasury Secretary Steven Mnuchin commented on a range of the initiatives proposed by the Trump administration. Notably, Mnuchin said that while the tax plan remains a key priority for this year, August seems an unrealistic deadline. Plans to boost growth via infrastructure investment also remain on the table for 2017 but seem unlikely to provide a growth boost before next year , in our view. The Treasury also appears keen on incentivising repatriat ion of foreign profit (i.e. with a so-called Homeland Investment Act 2) but Mnuchin was more reluctant to provide out right support for border-tax adjustments, stressing that there are both pros and consto this instrument. The latter essentially works as an import tariff/export subsidy and could thus, depending on the actual implementat ion, spur USD appreciat ion, which would not be welcomed by the Trump administ ration.
