Market movers today
The UK CPI inflation figure for July released today is likely to at tract significant attention. The development of inflation will be scrutinised because it will be a key factor in t he BoE’s decision of whether or not to hike rates before 2018.
In the US, retail sales figures for July are out today. We do not expect retail sales to deviate significantly from their only moderately growing trend. Overall, we expect consumption growth to continue at a decent pace, which should be mirrored by positive retail sales growth. Further, the Empire manufacturing PMI for August is also released today.
In the euro area, the first estimate of German GDP growth for Q2 is out . Throughout Q2, German activity indicators have reached historical highs signalling strong growth in Q2. The euro area reported quarterly growth of 0.6% last week and we expect a similar quarterly growth rate in Germany.
In the Scandi countries, Swedish CPI and CPI Figures for July are the main event today, where we expect CPI Ftobreach 2% (for further information, please see page 2). Additionally, we also get the Danish GDP indicator for Q2 and Norwegian trade balance figures.
Selected market news
Overnight , Asian equities followed US and European equities higher amid signs that a military conflict between the US and North Korea is not imminent . According to the North Korean news agency, North Korean leader Kim Jong Un is reviewing missile strike plans and said that he will watch what t he US is doing a “ little more”. Meanwhile, according to a Bloomberg story, the US defence secretary James Mat t is said t he US could “ take out ” any missile from North Korea and added that doing so “ could escalate int o war very quickly”.
President Trump yesterday signed a presidenial memorandum which will set in mot ion a US trade investigation of China’s intellectual property policies, which could lead to new tariffs on Chinese import s. China react ed yesterday through st at e media warning the US to avoid “ making [a] rash decision”, signalling t hat t he investigation could poison the overall China -US relationship especially at a time when the two countries are trying to deal with the North Korea issue. The risk of an immediate trade war is unlikely however as a senior US official signalled that the investigation could take up to a year and would involve consultations with China.
Yesterday, New York Fed governor William Dudley signalled that another rate hike this year is very much on the cards and suggested that the Fed would announce its tapering plans next month. He also predicted inflation would move somewhat higher as the labour market tightens further. The markets are currently pricing in about a 40% chance of a rate hike at the December meeting. We continue to have as a base case that the Fed will hike rates in December, followed by one or two rate hikes next year.
