- Risk appetite has continued its recovery overnight after Ukraine-Russia tensions eased somewhat yesterday. Asian stocks are also generally higher in a further sign risk assets are recovering this morning albeit the potential default of Chaori, a Chinese solar energy company, on a corporate bond have spooked markets in China a bit. Otherwise in China annual meeting of the National People’s Congress saw premier Li announce a 7.5% GDP growth target which is in fact identical to that of the past two years. This suggests that the reform agenda of Chinesr policymakers should be less negative for short-term growth than may have been feared. In light of the recent slowdown in the Chinese economy the growth target may however require more stimuli.
- Following last week’s strong Q4 GDP report Swedish industrial production figures for the month of January are due out this morning after the strong service PMI just released. We have been pleased to see the long-awaited recovery seemingly taking hold over the past two months. That said, we have a hard time reconciling the numbers with a more genuine recovery when analysing industrial data further; indeed, the numbers are pushed and pulled by a few sectors posting incredulous swings. Thus today we will look for signs of a more broad-based upturn in the first month of the year.
- CHF and JPY have been retreating against notably EUR and in absence of further escalation of events in Crimera currency markets will start to zoom in on the key ECB meeting tomorrow. With some ECB easing already priced in will be a disappointment (risk of EUR upside) if Draghi does not deliver something. Danish currency reserves figures revealed no intervention by the central bank in February even as EUR/DKK has arguably been trading close to possible intervention levels. If we are right in expecting the ECB to add to euro-zone liquidity by ceasing the sterilisation of the SMP programme this month then some of the upward pressure on the cross may subside and make an independent Danish rate hike even less likely.
- This afternoon watch out for any changes to the Bank of Canada (BoC) statement to come out in relation to the rate decision (most certainly rates will be kept unchanged).Notably the BoC January statement was soft but it did not include an explicit easing bias, but it did however explicitly express concerns over the still overvalued CAD in stating that it remains strong despite recent depreciation. It thus seems evident that the BoC will lag the Fed in scaling back on stimuli. We are not convinced the BoC will go as far as cutting rates but dovish talk could lead the market to start pricing this in to an even greater extent (little priced in terms of easing at present). Hence look for further (but less violent) downside in CAD.
Danske Bank