Market movers today
US markets are closed due to Martin Luther King day today.
With no important data releases from the euro area today, market focus will turn to this week's major event - the ECB meeting on Thursday. The ECB is under pressure to ease again, as the euro area is in deflation and the current easing measures are insufficient to expand the balance sheet sufficiently. Based on this, we expect the ECB to announce government bond purchases of EUR 750 bn at the upcoming meeting. This is somewhat higher than the consensus expectation but after the SNB's surprising move last week, market expectations for the ECB purchase programme seem to have become more aggressive and hence more in line with our view.
Early tomorrow morning Chinese Q4 GDP data are due for release. We expect growth to stay unchanged at 7.3% y/y in Q4 compared with Q3. Quarter-on-quarter we expect GDP growth to ease a bit to 1.7% q/q from 1.9% q/q in line with the moderate decline in China's manufacturing PMIs in Q4. For 2014 as a whole GDP growth is expected to be 7.4%, only marginally below the Chinese government's target of 7.5% GDP growth in 2014. The government is expected to cut its target for GDP growth in 2015 to 7.0%. Hence, at the moment there is no severe pressure for more fiscal and monetary stimulus policy but we still expect the People's Bank of China to cut the reserve requirement twice by 50bp in H1 15.
Given the current level of EUR/DKK significantly below the central rate following the SNB's move and with the ECB expected to boost EUR liquidity, we still see a case for further monetary easing in Denmark. We expect a 10bp cut in interest rates over the coming three months and it could come as early as this week.
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