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We are heading for a quiet er week in terms of data where inflation takes centre stage after activity numbers were in the spot light last week. On Wednesday, inflation is due out from China, Denmark and Norway followed by inflation releases for the US and Sweden on Friday.
Focus this week will also turn to the scheduled meeting between North and South Korea tomorrow to see if the apparent easing of tensions can be sustained and if it can pave the way for talks between the US and North Korea. There are doubts, though, as to whether North Korea are serious about the talks.
Make-or-break talks on forming a German government between CDU/CSU and SPD began on Sunday and continue this week. If the exploratory talks find enough common ground, the SPD leaders will ask for a party convention on 21 January to back full-fledged negotiations.
This morning, German manufacturing orders for November are due out , which are estimate by consensus to be flat m/m after a 0.5% m/m increase in October . The monthly changes are very volatile but the underlying trend is robust and supports the picture of strong manufacturing activity.
Todays’ batch of confidence numbers from the EU Commission is expected to show a similarly strong development . Euro area retail sales should have rebounded in November after a fairly big drop in October.
Finally, we look for a 0.5% rise in Norwegian industrial production for December, taking the annual increase to 2.5% y/y – the highest level since March 2015.
Selected market news
Market sentiment continues to be strong with further decent increases in stock markets on Friday. The Japanese market is closed today but other Asian markets continued the positive trend this morning. The US labour market report on Friday was on the soft side, suggesting that the Fed will continue to move slowly this year. On inflation, stock markets are seeing the best of all worlds at the moment with robust increases in producer prices feeding into profits, but with limited pass-through to consumer price inflation, which could make the Fed step on the breaks.
Former White House st rategist Steve Bannon yesterday issued an apology over his comments in the book ‘Fire and Fury: Inside the White House’ published on Friday, see Reuters.
Over the weekend, China FX reserves for December showed a bigger increase than expected. Reserves rose by USD20bn to USD3,139.9bn – the 11th increase in a row. USD/CNY is again trading close to the September lows below 6.5 after CNY has st rengthened over the past three weeks in parallel with the general USD weakness over the same period.
