Market movers today
Market focus today is on the US CPI core inflation numbers for February, which we expect to come in at 0.2% m/m (1.8% y/y, down from 1.9% y/y in January). We do not think one should read too much into a few releases that came out more strongly than expected, as there is usually some noise in the data.
We recently published a thematic five part series of papers on the theme ‘is inflation finally coming and implications for markets?’. Concerning today’s CPI print, we argued in Part 1: Global Inflation: US stimulus and closing output gaps pose upside risk, 26 February, that there are upside risks for US core inflation due to more expansionary fiscal policy but that it will take time for this to materialise.
Luigi Di Maio, leader of Five Star Movement , is due to hold a news conference today at 15:00, which could give some more insight into Five St ar’s plans following the inconclusive elect ion result .
Selected market news
This week started quietly. There were only slight developments in the protectionist narrative emanating from Washington. Today all eyes are on inflation.
The European Union is making an at tempt to exempt itself from US steel and aluminium tariffs, while maintaining that it will not cave into bullying.
As the EU deliberates, US President Donald Trump does not . He retorted that his Secretary of Commerce Wilbur Ross will talk to the EU concerning its ‘large tariffs and barriers’, which are ‘not fair to our farmers and manufacturers’. The US has come a long way from President Theodore Roosevelt , who prescribed US foreign policy as ‘talk softy and carry a big stick’.
Wilbur Ross and Peter Navarro are two of the architects of current US mercantilist trade policy that is predicated on trade being a zero-sum game. As in checkers (draughts), your loss is my gain. In such a game, current account surpluses serve the national interest. In addition, Navarro and Ross hold that a strong manufacturing sector is a quest ion of national security. We do not expectsanctions to escalate into a full blown trade war. We dive into US tariffs in Research US – Symbolic protectionism with limited impact on growth and inflation but risks remain , 7 March.
