Market movers today
With no big market movers on the agenda today, focus will be on Brexit negotiations, where things soured over the weekend (see below).
Tomorrow, Italy returns to the limelight as it is the deadline to send a revised budget to the EU Commission.
On the data front, the week brings US inflation, German ZEW and Chinese data on money, credit and industrial production. Focus in the Scandies will be on Norwegian GDP for Q3 and Swedish inflation. See also Weekly Focus, 9 November 2018.
In Denmark , we estimate CPI inflation rose to 0.7% y/y in October. See the Scandi section on page 2.
Selected market news
UK politics remain poisoned, as PM Theresa May tries to find a final compromise in her cabinet to unlock the negotiations with the EU. The ambition was to have a full draft withdrawal text ready early this week but the decision may be postponed further, as May’s proposal is under fire. While the withdrawal text is 95% complete, there is still no agreement on the backstop solution to the Irish border (i.e. how does one avoid a hard border between Ireland and Northern Ireland if the UK and the EU fail to reach an agreement on the permanent future relationship during the transition, which removes the need for a hard border). The development during the past week supports our view that the real test is probably not reaching an agreement with the EU, but to get the deal through the House of Commons. Brexit hardliners, the DUP, moderate pro-EU Conservatives and Labour are all threatening to vote it down. Our base case is still that the EU and the UK will reach an agreement in December but that negotiations may slip into early January . We still expect a decent Brexit (75% probability) but think one should not rule out a ‘no deal’ Brexit (15% probability). For more details, see our Brexit Monitor: No UK compromise on backstop proposal just yet, 12 November. Last week, EUR/GBP was below 0.87 but now it is moving back towards 0.88.
OPEC+ oil ministers held preparatory talks before next month’s OPEC meeting on Sunday. They indicated that oil production cuts in 2019 are on the table as a glut in the oil market remains. Saudi Arabia has hinted it will reduce oil exports by as much as 0.5million a day in December. Russia seems more reluctant to cut output, as the Russian energy Minister Alexander Novak has said it is hard to say whether supply will be too high next year. The oil price is currently slightly above USD71 per barrel, which is 15 dollars weaker than its peak in early October.
