Market movers today
There are no releases in the US due to Thanksgiving but keep an eye on any comments regarding the US-China trade negotiations , not least any signals on whether a US delegation will go to Beijing and possible retaliation measures from China following Trump’s signing of the Hong Kong bill (see below). On the former, China has invited the top negotiators but some sources have indicated that the US team will only go if it sees a high chance of a deal.
Today will bring a string of interesting Swedish data. For more on Scandi see page 2. In the euro area M3 and credit growth as well as the EU Commission’s survey data will give more insight in the state of the economy. It is also time for preliminary inflation data out of Germany .
Selected market news
Market sentiment this morning is caught between better-than-expected US data (see FX section for details) and US President Trump signing the Hong Kong bill , implicitly supporting protestors. The bill, which was passed by Congress last week, amongst other things requires annual reviews of Hong Kong’s special trade status as well as sanction against officials undermining its autonomy. China’s has reiterated its threat of retaliation. While this worsens the negotiation climate for a trade deal, it is still our belief that the sides will be able to keep the Hong Kong issue separate and land a phase 1 deal before the 15 December when US-China import tariffs are scheduled to rise by 15%.
The Fed’s Beige book released yesterday indicated that economic activity expanded ‘modestly ‘ in November, which is a stronger wording than the ‘slight-to-modest ‘ phrase from October. Also following the bunch of US data, most nowcasts have been revised higher illustrated by the Atlanta Fed’s ‘GDPNow’ Q4 estimate, which yesterday was lifted from a meagre 0.4% to 1.7% q/q AR. While not great, it does diminish downside risks.
Late last night the long awaited results from YouGov’s so-called MRP model for the upcoming UK general election were published. We were looking forward to the results, as the model was the only one correctly predicting that Theresa May would lose her absolute majority in 2017. The model is different from traditional opinion polls/seat projections, as it makes its predictions based on a bottom-up approach rather than top-down. YouGov’s MRP model predicts the Conservatives will win 359 seats (versus 211 for Labour, 13 for LibDems and 43 for SNP), which would mean a big majority (326 needed for a majority and in practice the number is actually smaller). As we do not have much else to rely on, a Conservative majority is now our base case (we did not have a base case until now). If it turns out to be right, PM Boris Johnson will be able to pass his Brexit deal before Christmas without too many problems, which is why the GBP has rallied. PM Boris Johnson pledged again earlier this week that he will not extend the transition period, which is set to end by 31 December 2020 (may be extended by 1-2 years if agreed before 1 July). This means there is a clear risk of a no-deal Brexit by this date if the UK and EU27 are unable to strike a permanent agreement. For more details see our Election Monitor .
Overnight, retail sales in Japan plunged as a consequence of the October implementation of the VAT hike and a typhoon.
