Market movers today
As the coronavirus theme gradually fades in the background for markets (see also Flash Comment: Signs that the spread of the coronavirus is slowing down, 10 February), focus today will be on the UK GDP and US data and host of Fed commentators.
In the UK, we get the first estimate of UK monthly GDP in December (and hence the first estimate for the entire fourth quarter). We know 2019 was a weak growth year in the UK but it will not have a big impact on the Bank of England, which has clearly stated it is more interested in monitoring post-election data, i.e. January and onwards.
In the US, NFIB small business optimism in January is released today. Fed’s Powell, Bullard and Kashkari are set to speak.
Overnight to Wednesday the Reserve Bank of New Zealand is expected to keep rates on hold.
Selected market news
Risk appetite was a bit sour in Europe yesterday, in what was otherwise a relatively uneventful trading session. Equities declined some 0.2%, with German yields declining 2bp (10y). The coronavirus is gradually fading in the background of financial market attention and the next focus point will be to see if the number of incidents picks up after factories have gradually started to reopen, which may rekindle a bout of uncertainty. With US equities hitting yet another record high yesterday, the overnight equity markets in Asia have been positive as well with ‘green’ across the board.
In a surprise move, Annegret Kramp-Karrenbauer (AKK) announced that she will resign as leader of Germany’s CDU party in the coming months to make room for a new chancellor candidate leading the party into new elections scheduled for the fall of 2021. The move was likely influenced by heavy criticism of AKK’s leadership in the Thuringian election debacle and her steady decline in approval ratings since becoming party leader in 2018. While AKK’s resignation is likely to increase the strain of the already fragile grand coalition, we do not think it will be enough to lead to a government crisis and trigger snap elections. Hence, the economic and market impact should be fairly limited at the current stage. Still, we think it will be important for markets to keep an eye on AKK’s emerging successor. Friedrich Merz, an economic liberal and fiscal conservative, who narrowly lost against AKK in 2018, could again become one of the frontrunners to take on Merkel’s succession.
Earlier this morning we received the latest labour market statistics, courtesy of the Swedish Public Employment Service (PES). Evidently, unemployment continues to rise and amounted to 7.4% in January and the trend since July 2019 is seemingly intact. Furthermore, it is a broad-based deterioration of the labour market, affecting all different sub-groups on the market. Given the shortcomings of Statistics Sweden’s labour market statistics, these figures from PES takes precedence for the time being. However, we anticipate no major market impact of today’s data.
