German inflation in the spotlight ahead of Friday's Euro area print

In focus today

Today, focus is on German inflation data for May which will give an important clue as to what the euro area print on Friday will show. We expect a large increase in core services inflation due to a base effect from the "German ticket", which lowered prices on public transportation in May last year. On Friday, we expect euro area headline inflation to remain at 2.4% y/y driven by rising energy inflation, falling foods inflation and unchanged core inflation at 2.7% y/y.

In the euro area, we will also look out for the April monetary aggregates and lending data. We focus especially on the lending data as we have recently seen signs of a gradual improvement in loan dynamics and thus the credit impulse.

In Sweden we receive retail sales and household lending data at 08.00 CET. NIER's retail confidence indicator suggests there may be a rebound in April after a setback in March. As for household lending it has begun reaccelerating in recent months, and we expect today's print to also be in this direction.

The Riksbank releases the first Stability Report for 2024 at 09.30 CET, followed by a press conference at 11.00 CET.

Fed's Williams (Vice Chair of the FOMC) and Bostic (voting member) speaks at 19.45 CET, and 01.00 CET (Thursday morning) respectively. SNB Chairman Jordan speaks at a conference in South Korea at 02.00 CET (Thursday morning).

Economic and market news

What happened overnight

In China, the IMF upgraded its growth outlook to 5% GDP growth for the year (prior 4.6%) and 4.5% in 2025 (prior 4.1%). The upgrade came after a stronger-than-expected first quarter, as well as recent initiatives by the Chinese government to stimulate the Chinese economy.

In Australia, inflation for April stood at 3.6% y/y compared to expectations of 3.4% y/y according to Reuters. The CPI reading also beat the reading in March which stood at 3.5% y/y. The upside surprise was in part driven by increases to petrol, health, and holiday costs. CPI excluding volatile items and holiday travel remained unchanged from March at 4.1% y/y.

In Asia, most equity markets are in the red this morning with only Shanghai slightly up.

In the US, yesterday marked the shift in markets to a shorter settlement period, as settlement has gone from T+2 to T+1.

US equity futures are pointing down this morning, after a somewhat mixed session yesterday which saw Nasdaq increase by 0.59%, and the Dow Jones fall by 0.55%, whereas the S&P500 and Russell 3000 were more or less flat.

What happened yesterday

In Norway, retail sales came in at -0.3% m/m seasonally adjusted for April. The figure confirms the sideways trend seen in retail sales since last autumn, as is also seen in the 3-month moving average standing at +0.1% m/m.

In the US, consumer confidence for May came in at 102.0 up from April's revised figure of 97.5. The figure beat consensus expectations of a 96.0 print. The higher print in May compared to April marked the first time in three months that the confidence indicator did not decline. Average 12-month inflation expectations rose to 5.4% from 5.3% in April. The 'perceived likelihood of a US recession over the next 12 months' also increased in May, as 69% (up from 65% in April) of consumers now believe a US recession is 'somewhat' or 'very' likely in the coming 12 months. Also in the US, Fed's Kashkari was hawkish when he said that he did not believe that any FOMC member had ruled out a rate hike. Markets sent yields higher on the statement. That said, Kashkari also said that he thinks the odds for a Fed hike is quite low.

In New York City, closing arguments were heard in the trial against former president Donald Trump who is accused of falsifying business records. With Trump aiming to reclaim the Oval Office from incumbent Joe Biden this 5 November, there is a lot on the line for the former president, although being the first ever former president convicted of a crime would not formally bar Trump from taking office.