Market movers today
We have a light data calendar today, with no big market movers in the US, euro area or UK.
Later today, the Reserve Bank of New Zealand will announce its policy rate decision, but we do not expect any changes and project the central bank to leave its cash rate at 1.75%.
In the Scandies, Danish retail sales data and the Norwegian Labour Force Survey for January are published. See the next page.
Selected market news
Asian equity markets were deep in the red this morning after Wall Street had its worst session since the US election, with the S&P 500 tumbling by 1.2% yesterday. The reason was growing concerns that the Trump growth policies will not be implemented as easily as expected, leading investors to abandon risky assets in favour of safe havens such as gold and govies.
EUR/USD climbed above 1.08 yesterday and French stocks and bonds rallied, as centrist Emmanuel Macron’s chances of winning the French presidency seemed to have risen after his strong performance in the first TV debate on Monday. The backing of his campaign of a junior minister in the Socialist government – the first to do so – and the resignation of the French interior minister amid another ‘fake work’ corruption scandal, seems to have boost his chances further. Whereas market concerns over a Marine Le Pen win might have somewhat abated, the focus could again soon return to Italy. A poll showed support for the Five Star movement (M5S) rising to 32.3%, its highest ever reading, whereas the ruling Democratic Party (PD) saw its popularity drop to 26.8%, due to internal feuds and divisions, with a left-wing faction of the party breaking away and forming a new party on their own (Democratic and Progressive Movement). Currently, the Paolo Gentiloni government is still working on drawing up a new electoral law with some form of proportional representation that might reward a stable majority to any party or coalition winning 40% of the vote. Although M5S so far has ruled out forming any coalitions with other parties, the traditional centre-right and centre-left alliance currently also falls short of the 40% threshold, leaving a high degree of uncertainty about who will head any future government. The current parliament is scheduled to carry on until May 2018, but a number of political leaders, including Matteo Renzi, are pressing for an early election already in September.
Yesterday, we also saw UK inflation surprising on the upside, rising to 2.3% in February. While inflation is now above the Bank of England’s 2% inflation target, it does not change our view that the central bank will stay on hold for a longer period of time and refrain from rate increases at a time of high political uncertainty with the upcoming triggering of Article 50 on 29 March. Donald Tusk announced yesterday that there will be a special ‘Brexit’ European Council meeting on 29 April, to agree and finalise the negotiation guidelines and official ‘Brexit’ negotiations with the UK could then start sometime in May.
Oil prices broke above 52USD/bbl on Tuesday, helped by expectations that OPEC would extend its output cut beyond June. However, prices slipped again in later trading as concerns about persistently high crude inventories resurfaced. Today’s release of US crude oil inventory levels will therefore be watched closely by the market.
