Market movers today
Scandi markets will be digesting the financial implications of the outcome of the Swedish general election. Exit polls at the time of writing suggest that country’s Red-Green block has 40.6% of votes, the Sweden Democrats 17.6% and the centre-right opposition Alliance 40.3%, meaning the absence of a clear leading candidate could trigger a political crisis during the formation of the government.
In the absence of major economic data releases, the key market focus will be on President Trump’s possible announcement of US tariffs on an additional USD200bn of Chinese goods.
Focus will also remain on emerging markets, where sentiment will be influenced by the possible new US tariffs on Chinese goods mentioned above.
Danish CPI for August is due today at 08:00 CEST. We expect -0.2% m/m and 1.2% y/y, against 0.7% m/m and 1.1% y/y in July.
Today also brings figures from Statistics Denmark for foreign trade, which has surprised on the downside thus far in 2018. The key question is whether exports will pick up after a disappointing H1 18.
Selected market news
The Swedish election turned out to be a very close run between the ruling Social Democratic government and the right wing opposition. Hence, it is uncertain who will be the next prime minister in Sweden as the right wing opposition has a majority with the Swedish Democrats. However, both sides in the Swedish parliament have refused to work with the Swedish Democrats, so we have to wait and see for the final outcome of the election. The EUR/SEK has traded steadily during the Asian session.
More Chinese imports could face large US tariffs as the public hearing period in the US ended last Wednesday. In May, when the latest round of tariffs was approved, the announcement came a week after the end of the public hearing period, which could mean an announcement this Wednesday, if not earlier. The announcement and possible retaliation measures from China would likely weigh on global risk sentiment.
Emerging markets will be looking out for completion of the negotiations between the IMF and Argentinian delegation, which could help stabilise investor confidence toward the country. On Thursday, the Turkish central bank rates decision will be keenly anticipated, and on Friday the Russian central bank will decide on the monetary policy rate.
July inflation in Denmark came in much higher than expected, mainly due to package holidays. We expect that to reverse, but the timing is uncertain, creating some downside risk to our forecast for August. We expect a marked decline in annual inflation in the coming months as the temporary effects wear off. We then expect inflation to increase again in 2019 and converge on the Euro area.
