In focus today
This morning we published our Nordic Outlook with updated economic forecasts. We expect the euro area and the Nordic countries to gradually move out of their current stagnation or mild recession (in Denmark’s case, stagnation outside pharmaceuticals). The US economy is stronger than expected, while China continues to muddle through. Interest rates can be gradually cut during 2024 and 2025, with central banks likely to move cautiously. Read more Nordic Outlook – Return to Nordic growth, 5 March.
In the US, Super Tuesday kicks off today when 15 states and one US territory are voting on their preferred candidate for the US presidential election in November. Focus will be on the Republican primaries where former president Trump is up against his former UN ambassador Nikki Haley. Trump is expected to win the most delegates, placing him on the doorstep of formally securing the Republican nomination.
Later today we get the ISM non-manufacturing PMI in the US.
In Sweden we get February service PMI numbers. We expect the numbers to show a third consecutive month above the 50-threshold, as well as come out above last month’s reading of 51.8. Deputy governor Bunge from the Riksbank is also due to speak.
Economic and market news
What happened overnight
In China, the growth target for 2024 together with a bunch of other goals were revealed in the Government’s Work Report released at the opening of the annual National People’s Congress. The growth target was set at 5% as widely expected, the same as in 2023. It is a more ambitious target this year, though, as the base effects are less favourable this year. The inflation target was unchanged at 3%, but in practice means little as inflation is currently far below the target at -0.8% y/y. A market focus in the report was the signal on stimulus and here it disappointed a bit as the budget deficit target was unchanged from 2023 at 3%, and the off-balance special bond issuance did not pose any upward surprises. Overall, the report did not provide much new information compared to previous statements from the government whereas the markets had been hoping for more. Offshore stocks are down around 2% this morning while the CNY is broadly unchanged.
The Chinese service sector disappointed and displayed slightly slower growth signals as the Caixin services PMI came in at 52.5 compared to 52.7 last month and a consensus of 52.9. The official non-manufacturing PMI by the National Bureau of Statistics stood at 51.4 in February.
In Japan, Tokyo CPI numbers for February were released. The numbers show that seasonally adjusted CPI excluding fresh food and energy stands at 0.09% m/m down from last month’s 0.19% m/m. We still look out for the first indications from the wage spring negotiations due later this month as these will be key for the Bank of Japan’s monetary policy going forward.
What happened yesterday
In the US, the Supreme Court awarded former president Donald Trump a victory by deciding states cannot bar him from running for federal office citing insurrection regarding the 6 January 2021 attack on the US Capitol. With the unanimous decision Trump will once again be able to appear on the Colorado ballot, where he had otherwise been barred from appearing back in December.
In the euro area, the Sentix Indicator measuring investor confidence rose to -10.5 from -12.9 in line with expectations. The reading marks an 11-month high for the indicator, albeit it remains well below its long-term average.
Equities: Global equities were marginally lower yesterday in an uneventful session. Defensive value outperformed not least due to communication services and consumer discretionary was lower. We would not be surprised to see a couple of wait-and-see days ahead of the ECB meeting on Thursday and Non-Farm Payrolls on Friday. In the US yesterday, Dow -0.3%, S&P 500 -0.1%, Nasdaq -0.4% and Russell 2000 -0.1%. Asian markets are lower this morning with China leading the declines following the speech from Xi Jinping at the annual people’s congress. Futures are lower in both Europe and US this morning.
FI: The first trading session of the week was a muted one in terms of macro or monetary policy news. Long-end EGB yields extended last week’s rally with peripherals such as Italy outperforming the core. Hawkish comments from Atlanta Fed’s Bostic provided renewed headwinds to US Treasuries, reversing some of the decline seen on Friday following the weak ISM figures for February. 10Y Bund yields ended down by 2bp, while 10Y UST yields were up 4bp throughout the day.
FX: EUR/USD is starting this week close to the upper end of the 1.0800-1-0850 range. Meanwhile, USD/JPY is comfortably above the 150-mark for now, whereas EUR/JPY at 163.30 still has its eyes on the 26 February 163.70 high. The small kneejerk drop in EUR/CHF immediately after the Swiss inflation data was soon erased and the cross trades above 0.96 for the first time since late November. Both SEK and NOK are on the defensive, with EUR/SEK at 11.26 back into our preferred range of 11.20-11.40 and where EUR/NOK is closing in on 11.50 again.