Today focus will once again turn to the Ecofin meeting and a possible rescue plan for Greece. There have been speculations that a plan of a maximum of EUR 25 billion euro in loans an guaranties would be launched today. But according the German and the French ministers of finance, this will no be the case, DnB NOR Markets writes in a note to clients.
“However it seems as Mrs Lagarde is in general more positive towards a package.”
Knut A. Magnussen
“US retail sales surprised positively on Friday, while consumer confidence fell back somewhat. In the euro zone industrial production rose much more than anticipated. Today focus will turn to the Ecofin-meeting, while the highlight of the week is tomorrows FOMC meeting,” senior economist Knut A. Magnussen at DnB NOR Markets writes.
There were only minor movements in main stock markets Friday. US long rates fell somewhat in advance of the FOMC meeting tomorrow, while the euro gained vs the dollar.
The NOK stays strong and EURNOK is once again trading down toward 8.
US retail sales surprised on the upside in February with sales up 0.3% in total and by 0.8% exclusive of cars. The outcome was far stronger than expected and once again the effects of the cold winter have been smaller than feared. Hence there will probably be a positive contribution to GDP-growth from consumer demand also in Q1.
The flow of funds data (released Thursday) showed that the deleveraging is about to slow somewhat. The debt reduction was 1.2% in Q4 – the lowest reduction since Q3 2008.
It also seems as the savings is about to stabilize after having risen in the first half of last year. In the second half the savings ratio was fairly stable at around 4%.
Consumer confidence fell somewhat in March according to the preliminary data. It was the index for the present situation that fell most.
We probably have to see a more marked improvement in the labour market before confidence will pick up more significantly.
Today the Empire State index will be published along with industrial production and the NAHB index for the housing market. It is expected that the Empire state index will fall slightly and that production will rise slowly. The NAHB is however expected to stay at the very low level – in the light of the weak labour market.
Production data for the eurozone improved markedly in January.
The increase was 1.7% m/m, whereas production was expected to rise by 0.7%. Furthermore production was revised up significantly for December, from -1.7% to +0.6%.
Of the main countries Italy contributed most to the positive development, but growth was strong both in Germany and France as well. Production has now risen for eight months in a row but the level is still far below the pre-crises level. However, the trend is strong and business confidence points in direction of further gains in coming months.
The euro, which had started to appreciate before the release, continued to strengthen after the data.
Today focus will once again turn to the Ecofin meeting and a possible rescue plan for Greece. There have been speculations that a plan of a maximum of 25 bill. Euro in loans an guaranties would be launched today.
However, according the German and the French ministers of finance (Schäuble and Lagarde), this will no be the case.
However it seems as Mrs Lagarde is in general more positive towards a package.
The euro has maintained its position over the weekend and is now trading around 1.3750 vs the dollar.
This week’s main event is the FOMC meeting scheduled for tomorrow.
At the previous meeting Mr. Hoenig dissented as he did not wanted to maintain the sentence indicating the interest rate would stay low for an “extended period-”
It seems reasonable that this topic will be discussed once again at the upcoming meeting. Nevertheless, we think that the sentence will not be changed at present. This is due to the development of the main indicators outlined by the Fed to be vital for monetary policy going forward: Capacity utilization, inflation and inflationary expectations.
The capacity utilization is still very low despite some improvement recently. Core inflation has declined somewhat (both the CPI and the PCE) and break-even inflationary expectations have also fallen somewhat from the previous meeting.
In Norway no more important data are to be released in advance for the rate meeting next week.
Today housing starts for January and foreign trade for February will be released.
Here’s DnB NOR’s current recommendations for stocks listed at Oslo Stock Exchange:
• Sparebanken Nord-Norge
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