Market movers today
Market focus is on the Iranian attack this morning and on possible retaliation measures from the US. We will host a conference call (in English) today at 15:00 CET about the US/Iran political risk.
In the majors, it is a fairly thin data calendar with a string of tier 2 releases with notably consumer and business confidence data in the euro area . For the economic sentiment indicator, we will watch whether it follows the December PMI signal (stabilisation) or IFO (further improvement).
Today, PM Boris Johnson will meet European Commission chief Ursula von der Leyen in Downing Street for their first face-to-face talks. Von der Leyen is also scheduled to hold a speech on Brexit. We do not expect any major news given that the EU is only about to agree on a negotiating mandate after the UK has formally left the EU.
In the US we get the ADP report, which could influence expectations ahead of Friday’s non-farm payroll report even if the correlation recently has been less than stellar.
In the Scandies, focus turns to Sweden with retail sales and not least Riksbank minutes marking the highlight of the Scandi data calendar. This morning we will also get manufacturing production data in Norway .
Selected market news
Overnight two US military bases in Iraq were attacked. The Iran Revolutionary Guard was quick to claim responsibility claiming it sent ‘tens’ of missiles. The latest reports are that a total of 15 missiles were fired with 11 hitting targets – 10 of which hit the Ayn-al-Asad base; an important US facility in Iraq. At the time of writing the size of the damages is unclear and it has not been confirmed whether there are any fatalities from the attacks.
US President Trump was quick on Twitter writing ‘All is well ‘, that the assessment of causalities and damage is taking place and that he will be making a statement later today. Iran’s foreign minister Zarif described the retaliation measures as self-defence and proportionate in size relative to the US assassination of Iran General Soleimani last week. He emphasised on Twitter that ‘We do not seek escalation or war, but will defend ourselves against aggression ‘.
Until this morning markets had been characterised by a ‘wait-and-see’ mode with respect to the Middle East tensions, the earnings season starting next week and Friday’s non-farm payrolls report. The attacks mark a clear escalation and the next big thing to watch out for is the US response, which is likely to be a function of the actual damages done in this morning’s attacks. We will therefore keep a close eye out for news flow on the damages.
Market reaction was initially strong sending equities lower, oil and gold higher and yields lower. A commercial airplane crash (technical problems) in Iran contributed to the market spikes. Meanwhile, markets were quick to fade the initial move and at the time of writing roughly two-thirds of the initial reactions across most markets have been reversed. That leaves e.g. S&P500 future only a modest quarter of a percent down as we await more news.
