Danske Research Team
Danske Bank A/S
Market movers today
In the US several FOMC members are scheduled to speak and they might add something to Bernanke’s recent dovish comments. James Bullard (voting dove) and Charles Plosser (non-voting hawk) will be crossing swords in connection with a conference in Jackson Hole. Bullard is one the FOMC-members arguing more attention should be paid to current low inflation and for that reason tapering now would be premature. Plosser will be a voting member next year and will in his presentation without doubt argue that Fed’s QE programme should be terminated sooner rather than later. San Francisco Fed president John Williams (a non-voting dove) will also be speaking about his recently released research paper A Defence of Moderation in Monetary Policy. As the title of his paper suggests it appears he is in favour of starting tapering soon and possibly even terminating the QE programme relatively fast even though he is considered a dove.
In Europe the main focus is expected to be on euro area industrial production for May, which is usually not a number that surprises a lot as many of the individual countries have already reported. We expect a slight decline in May but it comes on the back of moderate increase in the three previous months, so the overall picture remains stabilisation. In the US the main focus will be preliminary University of Michigan consumer confidence for July, where we expect an improvement slightly ahead of consensus. Market focus will gradually move towards Q2 earnings reports with JP Morgan Chase and Wells Fargo reporting today.
Scandi markets today
In the Scandi sphere there are no major releases in the calendar today. It has also been relatively quiet for Scandinavian currencies overnight with both SEK and NOK largely range-trading against EUR.
Selected market news
Yesterday Fed board member Elizabeth Duke (neutral, voter) submitted her resignation, which will be effective from 31 August. The White House Press Secretary declined to whether there would be any effort by the president to nominate a successor before end-August and hence Duke’s resignation could leave a vacant seat on the board.
Chinese Finance Minister Lou Jiwei said a 6.5% economic-growth rate would not be a ‘big problem’, underscoring that the new leadership in China is willing to sacrifice to some degree short-term growth for structural reforms. This has weighed on Chinese stock markets overnight after markets yesterday were boosted by hopes that the Chinese government might soon cut the reserve requirement or possibly even ease fiscal policy.
Overnight ECB’s Constancio said ECB forward guidance has been ‘successful in stabilising financial markets’, which he believes have been unduly affected by the recent Fed announcements of possible future tapering of quantitative easing.
Ben Bernanke’s dovish comments on Wednesday continue to drive the markets. US yields continued to decline overnight while USD has weakened a little against EUR. Asian stock markets are mixed as the comments from Chinese finance minister weigh on markets.
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