Market movers today
In a week with few important data releases and scheduled events, we expect markets to remain focused on global politics – there have been encouraging signs on trade policy lately but increasing worries over Syria and the US-Russia relationship.
In the US, retail sales in March are due out. Retail sales have been weak in recent months but the slowdown comes after a period with strong growth. Retail sales are very noisy but, given the high degree of optimism among US consumers, we believe private consumption will remain a growth driver.
We also have a range of Fed speakers later today.
In Sweden, March HOX residential property prices are in the limelight, where we expect another fall in prices (see next page).
Selected market news
Despite heightened geopolitical tensions over Syria after America, France and Britain launched military strikes over the weekend, US and UK stock index futures are in the green this morning along with most Asian equities as the risk of a military showdown between the US and Russia faded. However, volatility will likely remain elevated, also because the US Treasury Department is set to announce fresh sanctions on Russia today related to its involvement in Syria’s use of chemical weapons.
At the time of writing, EUR/USD was steady around the 1.233 level, while 10-year US Treasury yields ticked up to 2.84%. FX markets have been experiencing some trade war fatigue recently and, more importantly for both majors and EM, is the escalating Russia/Syria versus US/allies conflict in our view (see also FX section). The semi-annual FX report from the US administration notably did not label China a currency manipulator (though adding India to the watch list) and hence refrained from adding fuel to the trade war issue for now.
However, the pendulum keeps swinging in the US-China trade conflict. Recently, tensions eased following Xi Jinping’s speech at the Boao Forum last week, but we could see a further escalation again this week. The White House is preparing to announce details on which goods categories of the USD100bn announced previously will be subject to a 25% tariff and in this case we expect China to be quick to announce a 1-1 retaliation. While we still believe in a deal between the US and China, ultimately we may be in for another escalation soon. We are likely to see ebbs and flows in the conflict before a deal is finally reached down the line (see also Flash Comment: Is Trump preparing for a round of trade escalation – again? ).
EU and UK officials will start talks about the post-Brexit relationship this week, according to an EU official . There remain marked differences between the two sides: The EU has rejected the UK’s proposals as cherry picking, while the UK says the EU is being too inflexible. The sessions will also cover the still unresolved issue of the Irish border and other parts of the divorce agreement that remain to be settled.
