Market movers today
Politics continue to be in the spotlight as Italy faces a deadline today for a revised budget to the EU Commission. There are no signs though that Italy will budge and change it and the way is thus paved for a collision with the EU. The Commission will most likely proceed by initiating an excessive deficit procedure against the country.
Brexit negotiations continue today and tomorrow, as tomorrow is the deadline if there is to be an agreement this month. We think it looks increasingly difficult, see our latest Brexit Monitor , 12 November 2018. Supporting this view is a story from The Guardian claiming the UK Cabinet will not sign off a final deal at its meeting today.
On the data front, German ZEW is expected to stabilise while UK unemployment is set to stay flat at 4.0% (3M).
In Norway, we look for mainland GDP to have risen 0.3% q/q in Q3. In Sweden, Riksbank hawk Deputy Governor Ohlsson is due to give a speech on the economic situation and monetary policy at 15:00. For more on Scandi, see page 2.
Selected market news
According to Wall Street Journal sources (paywall), the Trump administration may take another step in the ongoing trade war by using ‘ export controls, indictments and other tools to counter the theft of intellectual property’. This might be the first sign that Trump will turn more hawkish on China after elections. While there were more encouraging signs before the elections, this is bad news, in particular ahead of the anticipated Xi-Trump meeting after G20 later this month. Another story reported that the administration is still considering imposing tariffs on auto imports due to national security , something that could jeopardise the US-EU trade talks. On a positive note, China’s Vice Premier Liu is said to be visiting the US ahead of the Xi-Trump meeting. An escalation of the trade war is an important risk factor to growth and market sentiment.
We discuss the political and economic outlook after the midterms in our podcast Macro Strategy Views: After the midterm elections – what now Trump? (SoundCloud link) , 12 November 2018.
EUR/USD finally broke below the technically important 1.13 mark yesterday and while we maintain that the cross is set for a decent recovery back to the mid-1.20s in 2019, we still see a range of factors keeping the cross under pressure towards year-end, notably the relative cyclical and yield outlook.
A tech-led fall in US stocks (S&P500 fell 2%) due to concerns over iPhone sales has led to declines in both Japan and South Korea. S&P500 futures point to further loses. Oil trades below USD70 a barrel after a Trump tweet criticising Saudi Arabia’s decision to cut oil production, as ‘oil prices should be much lower’. The relationship between the US and Saudi Arabia is gradually deteriorating.
