Market movers today
The key focus for financial markets this year (and t rigger of the surge in market volatility) has been inflation and this week will by no means be different . On Wednesday , both preliminary core and headline HICP numbers for the eurozone are due out and on Thursday t he Fed’s preferred inflation gauge, the PCE core inflation (and headline) numbers are due.
This morning, we are launching a one -week research series on inflation with a piece on global inflation pressures,.This will be followed by deep dives into inflation dynamics in the euro area, Scandi region and emerging markets, ending with FX and fixed income implications.
ECB President Mario Draghi is attending a hearing in the European Parliament at 15:00 CET: It is the first time in three weeks he will have spoken publicly and the second time since the January meeting. We doubt he will reveal new thoughts on the revisit of forward guidance, but as the hearing could be quite lengthy, we will watch out for any hints, also when he goes off script /introductory remarks.
In the US, speeches by St . Louis Fed President James Bullard and Fed Governor Randal Quarles are due, focusing on the state of the US economy
Selected market news
Market sentiment in Asia is positive following the rise in US stocks on Friday, where S&P 500 rose more than 1.5%. The Nikkei 225 index is up more than 1%. Asian currencies are also stronger versus the USD. One of the drivers of the positive market sentiment may be the lower US treasury yields with 10-year yields dropping toward 2.85% after touching 2.95% last week.
Certainly, financial markets will be on their toes looking for clues on US monetary policy today when Fed members Bullard and Quarles speak today followed by Fed Chair Powell ‘s hearing before the Financial Services Commit tee in Congress tomorrow. Prior to the Fed meeting in March, this is an opening for Powell to signal whether the Fed aims to do four rate hikes instead of three as signalled back in December in the latest project ions due to even more expansionary fiscal policy following the budget deal.
In China, the news agency Xinhua yesterday reported that the Cent ral Commit tee of the Communist Party has made a proposal to change the Constitution and remove the phrase that says the President can only sit for two terms (each five years). This paves the way for Xi Jinping being able to stay as President when his current term expires in 2023. With Xi Jinping most likely to stay in power for another ten years or even more, it means that the current Chinese economic reform path should be secured for the foreseeable future. The Chinese markets responded positively to the news this morning, although gains have faded a bit .
In the UK, the Labour Party said over the weekend that it wants Britain to seek a new customs agreement wi th the European Union after Brexit . This raises the pressure on Prime Minister Theresa May by leaving her at the mercy of t he ‘rebels’ in her own Conservative Party, who also want such a deal with the bloc in contrast to Brexit hardliners.
