Today's Key Points

- Risk appetite better with equities and bond yields slightly higher.
- Chinese inflation higher than expected. Australian central bank considered 50bp hike, minutes show.
- Focus today turns to CPI in Sweden this morning where we look for an upward surprise. Later today the NAHB housing index in US will be released.

Markets Overnight

US markets were closed yesterday, but risk appetite recovered a little in Europe with Eurstoxx50 up 2.0% and credit spreads a bit tighter. Overnight Chinese inflation was reported up 7.1% in January - higher than expected and driven by a rise in food of 18.2%.

Despite the bad US macro data last week bond yields are struggling to get much lower. In fact bond yields in Europe rose yesterday on the back of better sentiment in equity markets. Hawkish ECB comments have also dampened some of the near-term expectations of a cut in the market. US yields opened 4-5bp higher from Friday as well in Asian time.

In currency markets the biggest move has been in AUD after minutes from the Australian central bank showed it was close to raising rates by 50bp for the first time in eight years. AUD/USD moved higher towards 0.92 also supported by improved risk appetite. EUR/USD is up and trading at 1.471 and USD/JPY is down at 107.9. EUR/SEK went up to 9.32 late yesterday, but has come off a bit again. Note that our new forecast for EUR/SEK is now 9.20 on a 1-3 month horizon (for more see our note sent out yesterday). EUR/NOK is broadly unchanged around 7.895. The oil price is trading above USD 96 per barrel again on expectations that OPEC will curb production to keep prices high.

Global Daily

On the global agenda today we have Fed's Stern speaking on the US economy at 15.00 CET and the NAHB housing index in the US will be released tonight at 19.00 CET. On the NAHB number we expect an unchanged number at 19, which is in line with consensus. This level indicates continued declines in US construction and home sales.

In FX markets, yesterday was another day at the 'office of risk appetite' as low-yielders lost and high-yielders gained. Even in troubled times, brief rays of sunshine occasionally occur without this changing the broader trend, however. We generally believe that the current environment favours safe-haven currencies and see good reason to buy JPY and CHF on dips. As the trade-of-the-day we see good value in selling EUR/SEK before Swedish inflation figures at 9.30 CET in expectation of an upside CPI surprise.
Scandi Daily

Swedish inflation data are released today at 9.30. We forecast CPI at -0.3% mom/3.7% yoy and CPIX at -0.4% mom/2.5% yoy. This is one tenth above market expectations and also one tenth above the Riksbank February forecast. Uncertainty lies primarily in the rents component, where we have assumed the entire effect from reduced property tax to come in January. If that is not the case rents will probably rise more. If we are right it should support higher short rates and a stronger SEK as it might underpin the hawkish stance from the Riksbank. EUR/SEK is balancing at a 200-day moving average, and we recommend being short ahead of the figures.

Danske Bank