In focus today
This morning, we published our latest edition of Nordic Outlook in which we take a closer look at the major economies. We see that growth and inflation have been stronger than expected, pointing to fewer interest rates cuts delivered at a slower pace. In the Nordic countries the picture is more mixed, however the overall outlook remains for both higher growth and lower interest rates. Read more in Nordic Outlook – Warmer than expected, 4 June.
In Switzerland, May inflation is released at 08:30 CEST. Inflation is set to remain within the SNB’s 0-2% target range with headline expected to pick up to 1.5% given the full impact from higher rents still set to feed through. The print today is the final one before the SNB meeting on 20 June, and with a recent topside surprise in inflation in April, stronger than expected growth, a weaker CHF and recent comments from SNB President Jorden, a cut at the June meeting no longer remains a done deal.
In the US, we get the Job Openings and Labor Turnover survey (JOLTs) for April this afternoon (16.00 CET). Job openings and hirings have trended lower lately, signalling cooling demand for workers.
In Japan, we get data for cash earnings in April early Wednesday morning. With the release we begin to look for the pass-through of the solid spring wage hikes, although April is probably a bit early still to see a large effect.
In China, we get the Caixin services PMI for May. Consensus amongst economist expects a very slight uptick to 52.6 from 52.5 in April, which was very close to its long-term average. There is however some downside risk after the official NBS non-manufacturing PMI which showed some softness last Friday.
In Sweden, first Deputy Governor Anna Breman will be discussing the economic situation and current monetary policy. At 08:40 the Minister of Finance holds a press briefing regarding the economic situation together with the Prime Minister.
Danske Morning Mail will be off Wednesday 5 June due to Constitutional Day in Denmark. We look forward to return Thursday 6 June!
Both the Bank of Canada and the central bank of Poland will convene and announce their respective policy rates on Wednesday. We expect them both to maintain their respective current rate levels of 5.00% (BoC) and 5.75% (central bank of Poland).
We will also be getting ISM services out of the US. Earlier, the PMI services index showed a modest rebound in both current and incoming business activity, but still only modest price pressures were seen. We also get the ADP private sector jobs report for May. In April, private sector jobs growth outpaced weaker growth in public employment. Consensus expects ADP to print 175k for May down from April’s 192k.
In the euro area we will be looking out for April PPI data on Wednesday.
Economic and market news
What happened overnight
In Japan, Bank of Japan (BoJ) governor Kazuo Ueda told the Japanese parliament it was the policy of the BoJ to let financial markets determine long-term Japanese interest rates. However, he moderated the comment by following up saying, the BoJ may conduct ‘nimble’ market operations should long-term interest rates spike.
Asian equity markets are mostly in the red this morning apart from Hong Kong.
US equities closed mixed yesterday with the Dow Jones and Russell 2000 down, whereas the S&P500 and Nasdaq gained. Equity futures are flat this morning.
Oil prices took a dive yesterday, as Brent broke below the USD 80-mark, ending at USD78.36/bbl, down around 4%. This morning Brent is lower again trading at around USD77.8/bbl.
What happened yesterday
In the US, the ISM manufacturing for May came in below consensus expectations of 49.6, down from April’s 49.2, as the May figure stood at 48.7. US Treasury yields retracted some on the back of the data release, with the 10Y UST shedding around 5bp in the immediate aftermath of the release.
In Sweden, Manufacturing PMI rose to a two-year high of 54.0 and is now close to the index’s historical average of 54.3. The biggest contribution came from new orders. The spread between new orders and inventories continues to widen. As it is a leading indicator for the overall PMI figure, the manufacturing industry looks to be on the right track for recovery and the overall figure might very well soon reach 55-60.
In Mexico, the Nobel Prize winning climate scientist Claudia Sheinbaum won a landslide victory becoming the country’s first female president. Sheinbaum ran on a platform of expanding the welfare policies, something analysts have pointed to being a tricky task lying ahead of her, given low economic growth and a hefty budget deficit.
The USD increased by around 4% against the Mexican Peso (USDMXN) on the back of the result, and Mexican equity markets ended around 6% lower, as Sheinbaum’s green-left party together with two allied parties were nearing the two-third majority it would require changing the constitution – something investors fear would involve a dismantling of independent regulators.
