Weekly Focus Sweden: Central Banks Stepping On The Gas‏

The fiscal cliff continues to top the agenda in the US and the week brings a number of releases that could shed some light on the effects: the first regional PMI data for December and figures for new orders and consumer sentiment.

ECB President, Mario Draghi, has opened the door for rate cuts and may elaborate when he speaks during the week. Much hangs on incoming data and it will be particularly interesting to see the IFO, which may well point to brighter growth prospects in Germany.

The elections in Japan may have a significant impact on both fiscal and monetary policy and the latter could be in evidence before the week is out.

The Riksbank in Sweden will in all probability cut interest rates but there is unlikely to be any change in Norway.

Global Update
At the FOMC meeting in the US, it was decided that the expiring twist programme will be fully replaced by purchases of Treasury securities, which means that the Fed will buy USD 45bn in longer-term Treasury securities each month starting in January.

The instability in Italian politics caused high volatility in the Italian sovereign bond market. The Italian Prime Minister, Mario Monti, has announced that he will resign as soon as the budget for 2013 is approved.

Euro area PMIs were a tad better than expected, driven by an improvement in the service component. We expect PMIs to increase moderately over the coming months and for the euro area to be out of recession in H1 13.

Chinese hard data and manufacturing PMI confirms that the cycle has bottomed and that China has embarked on a moderate recovery.

In Japan, the Tankan business survey compiled by the Bank of Japan (BoJ) was weaker than expected and suggests that GDP has continued to contract.

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