Market movers today
A bunch of US key figures are on the calendar for today. We expect a slight setback in personal income and personal spending growth in line with the market’s expectation and unchanged PCE core inflation.
Three FOMC members are set to speak tonight. Their words could attract attention in an otherwise fairly uneventful day.
Selected market news
As expected the inflation rate in Japan more than doubled in April following the consumption tax hike which came into effect on 1 April. CPI ex. fresh food was 3.2% y/y in April, up from 1.3% y/y in March.
The US economy contracted 1% q/q ann. in Q1 14 – the first drop in GDP since Q4 11. The setback was mainly due to the harsh winter weather and less inventory build-up. Both are temporary factors which will not weigh on growth in the second quarter where indicators suggest that growth has rebounded.
In the Kazakh capital, Astana, Russia, Kazakhstan and Belarus yesterday signed a treaty to formally create a Euroasian Economic Union. Kyrgyzstan and Armenia may join the union later this year. The union, which will create a zone where goods, capital and labour can flow freely, is set to be effective from the start of next year.
Scandi markets today
In the shade of ECB positioning and upcoming critical inflation figures one could argue that today’s Swedish GDP figures for the first quarter are of secondary importance. However, should our forecast of -0.4% q/q/2.0% y/y prove to be correct it could, on the margin, put further pressure on the Riksbank to take action since it is on the low side of is +0.2%/2.5% projection, as it could be argued that it should have some implications for the inflation forecast.
As in Q4 13, the demand side is again driven by domestic demand whereas net exports continue to be a drag. On the production side, we expect the strong productivity growth in Q4 to be reversed given that hours worked appears to have increased by more than 2.0% y/y.
In Denmark, the market is closed again today.
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