Market movers today
Brexit remains very much in focus this week, with three key votes in the House of Commons coming up starting Tuesday, see Brexit Monitor – Brexit goes to overtime . We think the most likely outcome is that the House of Commons will vote in favour of asking the EU27 for a short extension of Article 50.
The US-China trade talks are also entering the final stage and markets will keep an eye on any headlines announcing a date for the summit between Donald Trump and Xi Jinping.
In the euro area, we get German industrial production figures for January today. Factory orders on Friday showed another monthly decline of 2.6% m/m, but the details revealed that orders from car manufacturers continued to recover in a further sign that activity in the sector is normalising, see chart on Twitter .
In the US, retail sales for January will be an important gauge for the strength of the US economy currently. In December, the retail sales control group fell by 1.8% m/m, the biggest drop since January 2000. We think the drop was a one-off and look for January’s numbers to come in at 1.0% m/m (3.3% y/y).
In Scandinavia, Danish and Norwegian February CPI inflation are in focus (see next page). In Sweden, Riksbank vice governor Henry Ohlsson holds a speech at 13:00 CET. We expect him to repeat it’s justified to continue to hike rates according to plan. This should not be a market mover, unless he surprises on the dovish side.
Selected market news
Chinese credit data fell back in February following the big jump in January. However, for the two months as a whole, aggregate credit was up around 25% compared to last year. M1 growth also increased from 0.4% to 2.0%, the first tentative sign of a turn in M1 growth. China’s central bank chief said over the weekend that there was room to cut the Reserve Requirement Ratio further, see Reuters . We look for a further cut fairly soon.
Over the weekend, Fed chair Powell repeated that the Fed is on hold for now. Powell said that the Fed funds rate is “in an appropriate place” and that the Fed will not overreact to inflation moving modestly above the 2% target. In his view, the current policy is “roughly neutral”. That said, he still thinks the outlook is “favourable ” and risks to the economy come from China and Europe.
In Germany, the CFU chief, Annegret Kramp-Karrenbauer, has dismissed some of French President Macron’s ideas of reforming the EU . Kramp-Karrenbauer rejects a European minimum wage, a unified social security system and joint debt issuance.
PM Theresa May has not been able to finalise a new deal with the EU yet but is ready to fly to Brussels today if there is a breakthrough . According to The Times , May is facing an even bigger defeat tomorrow than the first time (biggest on record). Some Conservative MPs are urging May to put tomorrow’s vote on hold. Others are calling for May to resign.
