Markets
There were few data to inspire global trading today. With policy meetings scheduled on Wednesday and on Thursday, Fed and BoE MPC members currently also abstain from comments on monetary policy. Luckily, ECB governors are again free to speak and temporarily have some kind of monopoly in setting sentiment. Looking at the comments post last week’s ECB meeting, it probably will take some diplomacy for ECB chair Lagarde to reach a consensus on the timing of a first rate cut. Of course, Lagarde’s assessment on Thursday that the ECB is data driven and not calendar driven, wasn’t the best way to reinforce/clarify the message from Davos that it probably will take until summer for the ECB to see the conditions being fulfilled for first rate cut. Hawkish members on Friday and this weekend maintained the view that the ECB needs to be sure that wage rises are again in line with the 2.0% target and that this confirmation won’t be available in March or April. Other more neutral/dovish oriented ECB governors use the idea that the ECB is not calendar but data driven to keep the door open for an early rate hike. In this respect, ECB’s de Guindos indicated that there has been good news on inflation recently and that this will end up being reflected in monetary policy. Markets also still felt confirmed in their dovish positioning by comments from ECB’s Villeroy this weekend as he said that, in a data dependent approach, the ECB could cut rates at any meeting this year. German yields continue their post-ECB decline easing between 7 bps (5-y) and 3.5 bps (30-y). US yields show a similar, slightly less outspoken pattern, ceding between 1.5 bps (2-y) and 4.0 bps (10-y). The prospect of/hope for a further easing of monetary conditions today didn’t trigger additional gains in equities. However, losses remain negligible, keeping recent all-time highs (S&P500; opening little changed) or cycle peak levels (Eurostoxx50, -0.1%) within reach. Brent oil opened north of $84 p/b in Asia on rising tensions between the US and Iran, but didn’t maintain the gains ($83 p/b currently). On FX markets, ongoing market speculation on an ‘early’ ECB rate cut and a more balanced risk sentiment causes euro underperformance. EUR/USD is setting a now 2024 low near 1.081. EUR/GBP (0.852) is coming ever closer to the 0.8493 2023 low. Even EUR/ bove the 160 barrier.Tomorrow, the calendar contains US consumer confidence (Conference board), the JOLTS job openings, EMU economic confidence and the first estimate of the EMU Q4 GDP. Spain and Belgium will already publish first January CPI data. We also look out whether the National Bank of Hungary will step up the pace of rate cuts from 75 bps to 100 bps.
News & Views
Belgian GDP grew by 0.4% in volume terms in the fourth quarter of 2023 compared with the previous quarter, the National Bank of Belgium said in its initial estimate. In year-on-year terms, the economy today is 1.6% larger than in Q4 of 2022. The first NBB calculations only entail a sectoral breakdown. Industry weighed on the activity. Value added in the sector shrank by 0.6% q/q. Services (+0.7%) and especially construction (+1%) reported positive growth. For 2023 as a whole, GDP grew by 1.5%. Value added fell by 3.1% in industry. Value added was up by 1.9% in construction and 2.6% in services.
Sweden’s monthly GDP indicator showed activity shrank in December of last year at -0.3% m/m. This follows a downward revision to November from +0.2% to -0.2%. The preliminary December reading resulted in a first estimate of the quarterly dynamics. Growth in that period amounted to 0.1%, less than the 0.3% analysts were expecting. The economy stagnated on a yearly basis, defying expectations for a 0.4% contraction. The series offer an early glimpse on the economy but differ from the regular quarterly publications as they are based on a limited set of data. If the Q4 data gets confirmed by the official reading end next month, it marks an escape from a (technical) recession where growth shrank 0.8% and 0.3% q/q in the previous two quarters. Sweden Statistics said that “weaker figures for domestic use were weighed up by a strengthening of net exports.” Signs of weak consumer spending indeed can be found in a separate release of the December retail sales in Sweden. Monthly sales fell by 0.2%, similar to November. The yearly figure came in at -2.2%, marking the 20th sub-zero reading. The Swedish krone reacted stoic. EUR/SEK is holding steady around 11.35.
