Market movers today
We have a relatively light calendar today, with only a few data releases in store. The aftermath of the French elections is likely to fade as focus shifts towards the ECB monetary policy meeting tomorrow.
In Sweden, April business and consumer confidence are due out . In general, especially business confidence has been very upbeat recently, not least after the Trump victory, and we might see some moderation of that going forward. Nevertheless, the macro situation in Sweden remains solid for the most part .
Bank of Japan monetary policy meeting. We expect the Bank of Japan (BoJ) to keep its monetary policy unchanged at its policy meeting ending early Thursday morning. This means that the BoJ will maintain its QQE and YCC with a target for the 10-year Japanese government bond yield of around 0%. This should not be a source of significant price action as this view is widely expected in the market . We still see USD/JPY in the 108-112 range in the near term.
Rate decision in Turkey. Turkey’s central bank (TCMB) is due to announce its monetary policy decision. We expect the TCMB to keep its benchmark reporate at 8.00%, avoiding extra pressure on the banking and corporate sector as TRY has stabilised. Yet , as inflation remains in the double-digit territory, we expect the late liquidity lending rate to be hiked by 25bp to 12.00%.Consensus median has the rate staying unchanged.
Selected market news
The rally in risk assets was extended in the US session last night and Dow Jones and S&P 500 indices closed 1.2% and 0.6% higher, respectively, after European equity markets locked in minor gains yesterday. Markets in Asia also trade higher this morning after higher-than-expected earnings results and the hopes of a US tax reform has boosted opt imism.
The Trump administration is expected to present its tax plans today. According to the media, President Trump will call for cutting taxes for individuals and lowering the corporate rate to 15%, while the border-adjusted tax proposal will be scrapped. However, according to White House Budget director Mick Mulvaney we should only expect the administ rations ideas/principles to be announced today, while the full tax plan will not be released until June. We still expect Trumponomics to come later and be smaller than pledged due to disagreement within the Republican party.
In the fixed income markets, the yield on 10-year US treasuries added less than one basis point to 2.34% yesterday, while the sell-off in the European government bond space, not just the core but also the periphery bond markets, cont inued. The result was a further bear curve steepening with especially the 10-30Y segment under pressure with the 10Y German government bond yield trading nearly 5bp higher. European markets are likely to remain under pressure ahead of the ECB meeting tomorrow, as some investors might fear that the ECB could send small signals towards reducing monetary stimulus.
