Yesterday was a day of recovery for the rouble but we expect volatility to remain high. Safe haven flows in to the Swiss franc caused the SNB to introduce negative interest rates.
Overnight as widely expected there were no Christmas presents from the Bank of Japan. The massive stimulus implemented just seven weeks ago remains in place. Looking into 2015 the BoJ is likely to become more dovish as Premier Abe will replace two retiring members with successors that share his reflationary view.
China has revised up the estimated size of its economy for 2013 by 3.4%. Statisticians found more GDP in the service sector. The National Bureau of Statistics said the revision will not affect economic growth this year. Stock markets in Asia are ending the week up 1% to 2%.
Bond markets digested the Fed’ slightly changed message. Markets are now pricing in the first hike for September 2015, while we still expect lift-off in rates for June, as we argued here. We also updated our financial forecasts (with only minor revisions). Yields on 10-year Treasuries rose to 2.20% and the spread over Bunds widened. The Bund curved steepened, also at the long end. 10-year Spanish yields dropped to a new record-low of 1.74%.
No bond supply today and not much on the data agenda, either: German consumer confidence, French business climate and current account numbers for the Euro area. The two-day EU summit will continue in Brussels with the discussion focused on possible new sanctions against Russia and the Commission’s investment plans. The Fed’s Evans and Lacker will speak.
Nordea