Market movers today
Today is a very busy day. At 10:00 CET, we expect Norges Bank to stay on hold but to confirm plans to tighten monetary policy in March. That said, the interest rate path in the monetary policy report can be expected to be somewhat more cautious than in September.
At 13:45 CET, we expect the ECB to formally end the QE programme. While this is (on paper) a hawkish policy move, we expect a dovish tightening as confirmation and reassurance of an accommodative monetary policy stance going forward. We expect no new guidance on a first rate hike. The press conference begins at 14:30 CET where we expect Draghi will try to be as ‘dull’ as possible. See ECB Preview: A new chapter of dovish tightening, 7 December.
The EU summit will begin today with Brexit on the agenda. While the EU27 has said they will not renegotiate the Withdrawal Agreement (including the backstop), they have indicated they will discuss how to help give UK PM Theresa May further assurance that it is not in the EU’s interest to keep the UK ‘trapped’ in the backstop solution indefinitely. The question is whether such an assurance is enough to calm UK politicians so they will support the deal when put forward in the House of Commons.
US initial jobless claims due out 14:30 CET will be interesting. Initial jobless claims have risen steadily from the bottom at 202,000 in September to 231,000 the last time. While still low, an increase may add fuel to concerns the US economy is slowing.
Swedish Prospera’s inflation expectations survey is due out at 08:00 CET and unemployment data is due out at 09:30 CET.
Selected market news
Equity markets moved higher yesterday on renewed optimism on US-China trade talks. The positive sentiment continued in Asia with Chinese equities up close to 2% and US bond yields higher. News broke yesterday that China may delay its ‘Made in China 2025’ strategy by a decade and replace it with a programme that promises greater access for foreign companies. China also made its first major soybean purchase from the US, delivering on the promise in the ceasefire agreement that China would immediately start buying US farm products. We see it as further confirmation that the two sides are very committed to reaching a trade deal this time, although the ceasefire deadline of 1 March could be extended into Q2 if needed.
UK Prime Minister Theresa May survived a confidence vote last night. However, it is really difficult to see where the Brexit saga will end. With this result, it has probably become more difficult for May to get her deal through parliament even if she gets more assurance from EU leaders. It is still our baseline scenario that a Brexit deal passes the vote in parliament, most likely in January. But uncertainty will remain high in the short term.
