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In the US, we get the FOMC minutes from the December meeting and we will look for clues as to whether other members other than Charles Evans and Neel Kashkari came close to dissenting. ISM manufacturing is also in the spot light .
In Denmark, we get FX reserves data for December. In Norway, we get the labour force survey for October but remember the more stable labour market statistics from NAV is more important .
Finally, Mi fid2 is officially new regulation in Europe from today. It could potentially mean less market liquidity in the next couple of days as traders and asset managers adapt to the new regulations and rules in real-t ime.
Selected market news
European bond markets came under pressure on the first trading day of the year and the yield on 10Y Bund rose 4bp to 0.46% – the highest level since October 2017. The combination of generally strong PMI data indicating that inflation eventually will pick-up and comments over the weekend from ECB’s Coeure weighed on the market . Coeure said that unless inflation disappointed there’s a " reasonable chance" the central bank’s extension of QE in October last for nine months could be the final extension. Especially, the lat ter weighed on periphery bond markets together with markets st ill wary ahead of the Italian March general elect ion.
The FI sell-off also comes ahead of a busy bond supply calendar in Q1 and especially here in January, where a number of syndications are due and the ordinary auction calendar is full. Yesterday, the Irish Debt Management Office said thatithas mandated six banks including Danske Bank as joint lead managers for a forthcoming new 10-year bond that – subject to market conditions – is due to today. The Coeure comments and the recent pick-up in long-term inflation expectations, where the 5y5y EUR inflation swap is at 1.74% which is close to the highest level in a year, underline that the risk of further pressure on European FI markets here in January should not be neglected. It seems that the global ‘reflation trade’ is once again back in focus.
The factors that pushed yields higher in the Euro zone yesterday also added to the strength of the Euro and EUR/USD traded above 1.2050 – the highest level in three years. The cross is not only supported by EUR strength but also by a general dollar weakness seen here in 2018. European stocks had a hard time following the positive Asian sentiment yesterday as the strong Euro weighed on sentiment . US stocks on the other hand had a strong opening day with tech stocks taking the lead as Nasdaq rose 1.5%. In respect of financial market s preparing for today’s Mifid2 launch Bloomberg reported that turn-over was lower than usual yesterday. We expect that any potential market impact on liquidity will be temporary.
