Market movers today
Germany is due to release industrial production at 8:00 CET for November, which is expected to show a decent rebound of 1.8% m/m after the 1.4% m/m drop in October.
Euro unemployment for November is estimated to have declined to 8.7% from 8.8% in October. It would be the lowest level since 2009 and below the long-term average. However, i t is sti ll above the EUC ommission’s e stimate for lon g-term unemployment at 8.4% for 2018.
The US is due to release NFIB small business optimism index around noon. It continues to beat very strong levels –boosted partly by the expectation of a US corporate tax cut.
Chinese inflation numbers will be released overnight. We expect an increase in the CPI inflation from 1.7% to 1.9% – still far below the 3% target. PPI inflation should drop back to 4.8% y/y from 5.8% y/y due to base effects from a very strong m/m November increase in 2016.
Selected market news
Overnight , USD/JPY dropped on news that the BoJ has cut back its bond purchases in the long end of the curve. The cut back is a consequence of the central bank’s yield curve control target, but triggered concerns in the market that an exit from quantitative easing is drawing closer. Yesterday saw a couple of interesting dovish comments from members of the Fed. The At lanta Fed’s Bostic (vot er in 2018) stated that his base case is two to three hikes in 2018 contrary to the median dot of three hikes, that low inflation expectations is a risk and that the Fed should be extremely cautious if the yield curve gets close to inverting. In addition, San Francisco’s Williams was advocating for price level targeting and arguing that it is in fact a very modest change compared to the current inflation target .
There was also a string of interesting news from the White House. According to Reuters, US President Trump is said to be close to nominating a person for the position of Fed Vice Chair and apparently Richard Clarida is out of the race for that position. According to a Bloomberg story, US Treasury Secretary Steven Mnuchin has apparently asked congress to lift the debt ceiling before 28 February, which in turn would put a lid on any concerns in the market about a near-term US debt default . Finally, the White House is apparently considering a targeted strike in North Korea as a reaction to a missile test in order to illust rate that the high price the nation could pay for nuclear progress would be feasible according to WSJ. The market did not react to the news, but it serves as a reminder of the geopolitical risks looming in the background.
In the oil market , we have seen supply-related news out of Libya and Iraq. The former was said to ready a rise in output after a pipe blast two weeks ago, while the latter is confronting the Kurds about the crude production taking place in the northern part of Iraq. The oil market saw little reaction to the news.
