Market movers today
Today, we have another important day ahead of us. The Brits are going to the ballots and the outcome of the general election will be decisive for Brexit. The polling stations close at 23:00 CET, when we will also get the exit polls, which have been a reliable indicator for general elections. Our base case remain a Conservative victory, but as the YouGov’s latest seat projection released Tuesday suggested, it may be closer than we think. In case of a Conservative majority, we think PM Boris Johnson can get his Brexit deal through Parliament before Christmas, such that the UK leaves the EU on 31 January 2020. In case the opposition wins (Labour+LibDems+SNP+some smaller parties), we expect the parties to agree on a second EU referendum, where polls show “remain” is slightly ahead. Both scenarios are likely to be interpreted positively by investors. Note, however, that the no deal Brexit fears may come back eventually if the withdrawal agreement passes, as the more complicated negotiations on the permanent future relationship are only set to start when the UK formally leaves the EU. The negative scenarios are either a hung parliament or the unlikely scenario that Labour wins an outright majority due to the uncertainty it creates. See UK election preview .
Today, the ECB’s new president, Christine Lagarde, makes her debut when the ECB announces its monetary policy decision at 13:45 CET, followed by the press conference at 14:30 CET. We do not expect any policy changes but it will still be interesting to see how Lagarde shapes the ECB. Focus will instead be on the strategic review, where we hope she will outline the scope of the exercise. See ECB preview.
Consensus expects Turkey’s central bank to cut its policy rate from 14% to 12.5%.
US-China trade talks are still on our radar ahead of the 15 December deadline, where the US is set to hike tariff rates on imported consumer goods from China.
In Sweden, November unemployment data is due out, ahead of the Riksbank’s (likely) hike next week and the problems surrounding employment statistics as of late.
Selected market news
Markets traded mostly sideways ahead of the major events towards the end of this week, starting with the FOMC meeting last night. As expected, the Fed did not change its target rate (still 1.50-1.75%) after three cuts in a row. The FOMC members thinking that the “current stance of monetary policy is appropriate” have now been included in the statement officially, which, however, still highlights the challenges with slower global growth, a trade war and muted inflation pressure. Looking at the ‘dots’, 13 out of 17 FOMC members expect the target range to remain unchanged throughout 2020, while four expect one hike. It is striking that no one signals a cut, which is at odds with market pricing. Our base case remains that the Fed will deliver a fourth cut some time during the spring, which is, however, not a high conviction call. See FOMC review , 12 December 2019.
