Market movers today
After the PMI manufacturing releases earlier this week, the focus turns to the non-manufacturing part of the economies. The service sector has so far been the stalemate of the eurozone economy, supported by solid real wage growth and good employment prospects.
For the same reason the euro area retail sales in December will be interesting .
In the US, we have the ADP jobs report , which, unfortunately, is a poor indicator of what to expect on Friday when the official jobs report is due out.
One of the key focuses for the rest of the week is a possible OPEC+ meeting , which could be moved forward from early March to discuss emergency output cuts. Saudi Arabia is pushing for a production cut of at least 500,000 barrels a day but Russia is pushing back. Experts from the OPEC+ will meet again today to discuss the outlook.
In Poland, the central bank rate decision is due . We expect rates to remain unchanged. The key focus is on the central bank’s assessment of the growth outlook in light of weak PMI readings and the outbreak of the coronavirus. However, the key meeting will be in March, when the new staff projections are due, notably on the inflation front.
Selected market news
The number of people infected with the coronavirus in mainland China has risen to more than 24,000 and the number of deaths is above 500. While the pace of the spread continues to slow, it has not slowed as fast as hoped for (still around 19% a day in China) and uncertainty remains high. It is still mostly Hubei province that has been hit. Risk sentiment is recovering and at the time of writing the Nikkei and Shenzhen CSI 300 index were both up nearly 1.5%, the US 10yr yield was briefly above 1.6% yesterday and oil rebounded from a one-year low at 54.65 dollars per barrel.
We finally got some results from the Democratic primary in Iowa,although only 71% of the results were counted at the time of writing. Very interestingly and against expectations, Pete Buttigieg is ahead so far with 26.8% of the votes, with Bernie Sanders a close runner up (25.2%). Elizabeth Warren is third with 18.4%, while Joe Biden disappointed significantly and is currently in fourth place with 15.4%. This probably gives Buttigieg some momentum going into the upcoming primaries, the next being New Hampshire. There was not much interesting to report from President Trump’s State of the Union speech.
Danmarks Nationalbank (DN) sold another DKK12.1bn EUR/DKK in FX intervention in January . FX intervention now totals DKK17.8bn since October. EUR/DKK continues to trade close to the level that has triggered FX intervention in recent months and we expect it to stay here until DN hikes rates. We now forecast DN to hike its policy rate 10bp to minus 0.65% in H1 this year – previously we forecast a hike in H2. For more details, see Flash Comment Denmark: FX intervention continues, we now expect a hike in H1, 4 February 2020.
