Market movers today
We have a very interesting week ahead of us although today is quiet in terms of economic data releases. We thought that the US and China were about to strike a trade deal this week, but Trump’s latest tweet questions that (see more below). This is likely to dominate markets today.
In terms of economic data releases, European PMI services, retail sales and investor confidence are due out today. We also get unemployment data for Norway.
In the UK, we will follow the cross-party negotiations between Theresa May and Jeremy Corbyn that May’s team wants to wrap up this week after both parties suffered in the UK elections last week. According to media reports, Theresa May is preparing to offer Corbyn to make a customs arrangement with the EU.
Otherwise this week, German industrial production, US inflation and China inflation are due out. The EU Commission is also publishing its new economic forecasts for the EU countries.
In Scandi, we get Riksbank minutes tomorrow and Norges Bank decides on monetary policy on Thursday.
Selected market news
Over the weekend, US President Trump threatened to impose new tariffs on all of US imports from China. It is a huge turn of events that adds renewed uncertainty to the outcome of this week’s talks. It may be that it is just a bluff and an attempt to squeeze out more of China but bullying rarely works on China and Trump’s threat could backfire. Chinese Vice Premier Liu He is supposed to travel to Washington this week to wrap up the negotiations but this meeting may be cancelled now. That said, according to the US, the renewed threat comes as China is backpedalling on earlier commitments.
If talks this week fail, we could face a new escalation of the trade war, which would give a big hit to risk sentiment and could derail the brewing signs of recovery in the global economy. This morning stocks are flashing red in Asia with Chinese stock indices more than 5% down. Futures on S&P500 are down nearly 2%. Yuan plunged the most in three years.
However, with Trump going into election campaign, we still do not think he would risk a no-deal outcome that would most likely derail the stock market rally and cause a dive in economic sentiment. So our baseline is still a deal by the end of Q2. But uncertainty has clearly gone up.
