Market movers today
In the UK, the PMI services index for January will give us a first glimpse into how the economy started out in 2019. Amid the ongoing Brexit uncertainty, we think the index will be broadly unchanged around 51.2.
In the US, keep an eye on the US ISM non-manufacturing for January, where consensus is for another decline in line with the move from the earlier released Service PMI.
The final January Service PMIs in the euro area are also due, including first readings for Spain and Italy, but more interesting will probably be whether December retails sales remained on the downward trajectory of the past months.
In Sweden, focus is on the PMI for January and industrial production figures for December, which we believe will have taken a hit. In Norway, we estimate housing prices were more or less unchanged in January.
Selected market news
Risk sentiment continues to be well supported with US equities ticking higher, although there was little market news. Most of Asia is closed for their New Year’s celebration. The S&P reached its highest level since early December, although at very low market volumes. Recently, equity markets have been bolstered by dovish signals from global central banks and positive signals from US-China trade talks. Federal Reserve Chairman Jerome Powell met President Donald Trump at the White House for dinner on Monday to discuss recent economic developments and the outlook, but the central bank said the Fed Chief did not share his expectations for monetary policy. The meeting was initiated by President Trump and comes after he strongly criticised the Fed for following a too tight monetary policy just before Christmas, which exacerbated the equity market sell-off at the time. The Fed has recently removed its forward guidance of ‘further gradual increases’. We agree the Fed is on hold for now, but still think it will raise rates this year as the US economy continues to grow above potential and labour markets continue to tighten.
Yesterday, oil prices dropped back with Brent falling to USD61.5/bbl after touching USD63.5/bbl briefly in the start of the day. The move comes after Russia’s Energy Minister Alexander Novak indicated that Russia is committed to reaching the output target by May. Elsewhere, Venezuela’s defaulted 2027 bonds fell as Spain, Germany and the UK led a host of European countries in recognizing National Assembly leader Juan Guiado as the country’s Interim President on Monday. Interestingly, Italy refrained from recognising Guiado as president, pointing to the strained relationship between the new Italian government and traditional EU allies. However, oil prices session halted their decline later in the trading as traders weighed output cuts from OPEC and its partners against expectations for rising US crude inventories.