In focus today
From the US, durable goods orders are due for release for February and Conference Board will release its consumer confidence survey for March. Consumer confidence has improved gradually over the winter as slower inflation supports real incomes.
In Sweden we get producer and import price index for February and the Economic Tendency Survey from NIER. The latest survey showed a significant drop in companies’ expected sales. It will be interesting to see if the decrease persists. This is especially important in relation to expected selling prices for the sticky service inflation that is still marginally higher than levels that are consistent with the inflation target of 2%.
The Hungarian central bank will announce its rate decision today. We expect a rate cut of 75bps from 9.00% to 8.25%.
Economic and market news
What happened yesterday
In the US, Fed’s Cook (voter) said that the Fed needed to have a cautious approach to policy easing. Bostic (voter) again stated that he expects only one rate cut in 2024, which he also said on Friday.
In Japan, authorities in Japan are not holding their silence as they try to ‘verbally manage’ the weak currency, which likely has surprised them after the BoJ rate hike last week. USD/JPY has consolidated above 151. Masato Kanda from the Ministry of Finance said that he is clearly seeing speculative moves in the foreign exchange market and is prepared to act.
In Russia, the government has ordered companies to reduce oil output in the second quarter as previously indicated. Output is set to be cut by 471,000 barrels per day to ensure they meet the production target agreed upon in the OPEC+.
Russian President Putin acknowledged that the terrorist attack on a concert hall near Moscow last week was carried out by Islamic militants, but still signalled that he thinks Ukraine played a role in the attack.
The UN Security Council demanded an immediate ceasefire between Israel and Hamas in Gaza and the release of all hostages. The US abstained from voting, which allowed the UN resolution to be passed.
Equities: Global equities started the week lower with Europe and small caps being the bright spots. With very few macroeconomic headlines, it was not a surprise to see a quiet start to the week, which is shortened by holidays. There is discussion among investors if Fed will be able to deliver the cut suggested by the dot plots last week. Investors feel challenged not so much by the job market or demand-side, but rather the inflation outlook. The next big test will come later this week when the PCE numbers are due. In US yesterday Dow -0.4%, S&P 500 -0.3%, Nasdaq -0.3%, and Russell 2000 +0.1%. Asian markets are mostly higher this morning together with US futures while European futures are marginally lower.
FI: Global bond yields rose yesterday on the back of a string of more hawkish comments from various Federal Reserve members. There are few tap auctions in the EGB market today. Germany is tapping in two green bonds. One is the old 5Y OBL, but now a 1Y bond (OBL 04/25), while the other is the 10Y Green Bund (DBR 02/33). Netherlands is tapping up to EUR 2bn in the 5Y benchmark. The green premium in the 10Y German benchmark is very small, while it some 4-5bp in the short-dated bond and 1bp in the long.
FX: In a relatively quiet start to the week the most notable development in FX markets has been the stabilisation in the CNY amid the Chinese authorities adjusting the USD/CNY fixing lower for the second consecutive session. As argued in yesterday’s edition this seemed an important near-term condition for USD weakness and EUR/USD did indeed move towards the 1.0850 mark in yesterday’s session. The SEK has been among the underperformers ahead of the Riksbank meeting while both EUR/NOK and EUR/GBP were close-to-unchanged on the day in yesterday’s session.
