Johnny Bo Jakobsen
Johnny Bo Jakobsen is Nordea Markets' Chief Analyst on the US. He is responsible for Nordea's view on the US economic outlook and Fed policy.
Johnny has been with Nordea for 15 years and during that time he has also covered Japan, the UK and Denmark. Prior to joining Nordea, Johnny worked at the Danish Ministry of Economic Affairs and he holds an M.Sc. (econ) from the University of Aarhus.
With today’s employment report adding to the recent string of 200k+ payrolls gains I can’t rule out that the central bank pulls the trigger on tapering already at the 17-18 December meeting, but...
Next week´s key events USA Next week’s most important US data release is the Nov retail sales report. Nov retail sales (Thu) are expected to increase 0.5%, mainly driven by auto sales. The consensus is looking for a 0.2% rise …
Against the background of weak activity, a benign inflation environment and a high AUD we expect another RBA rate cut in early 2014. We therefore lower our AUD forecast.
Next week’s most important US data releases are the Nov employment report and the Nov ISM manufacturing survey. We expect payrolls to come in at 170k (consensus at 183k) and ISM to come in at 55 in line with consensus.
With the Fed far behind the curve, we expect US inflation risks to become much more of a market concern in 2014.
• Norway: We expect Norges Bank to cut rates by two times 25bp next summer. There will however not be any such signals at the upcoming MPC meeting in December. Still, we believe the recent weakening of the NOK is …
Important sentiment indicators will be closely watched from the Euro zone next week, including IFO and flash PMIs. In addition, we will get CPI from the US, Flash PMIs from China and growth numbers from Norway. Much more in the Week Ahead!
In the aftermath of the strong US payrolls report, the 10Y yield is heading for 3% again, driving also EUR yields higher and leading to steeper curves. We are unlikely to go higher than 3% for now, though the risk of a short-lived bigger sell-off is real. Fed tapering is looming, although not yet in December.
Yesterday’s Q3 GDP report was not strong and certainly not as positive as the headline number indicated, but it still added to the picture of a gradually growing underlying strength in the broader economy.
All eyes on the ECB and the employment report from the US next week. In addition, the BoE rate decision, trade numbers from China and industrial production from Sweden. More on this in the Week Ahead!
The FOMC today signalled that tapering of the central bank’s asset purchases is just on hold, and not off.
In tomorrow's FOMC statement the key issue to keep an eye on is the Fed’s forward guidance on its asset purchases for any signs that tapering is off, and not just on hold.
Next week´s FOMC meeting will be important for the market´s tapering expectation and we expect a signal that tapering is off the table for this year. In addition, inflation numbers from the Euro zone will be closely watched, and any downside surprise would likely put additional pressure on the ECB to ease further.
In this note we provide some updated thoughts in Q&A form on the next episodes of the continuing fiscal soap opera in Washington DC.
All eyes will be on the fiscal negotiations next week and if there is a solution we may finally get the employment report from the US. In addition, GDP from China and the unemployment rate from the UK will be out. From the Nordics the new budget will be out from Norway on Monday and the unemployment rate from Sweden.
Here is an overview of our financial forecasts. Read the full report in the attachment or the headlines for a summary.
Frustration. That was a clear key take-away from a study tour to the US last week. My best guess is that a deal to end the government shutdown will not be reached until close to the 17 October debt ceiling deadline. A total blow-up with a government default seems unlikely, though. In the face of this uncertainty the Fed is likely to delay tapering until its January 2014 FOMC meeting.
The US budget discussions will be in focus early on in the beginning of next week. Later on, ECB´s rate decision and the employment report will be closely watched. From Asia, Premier Abe´s tax hike decision will be a much anticipated event. More on this in the Week Ahead.
The coming days promise yet another fiscal cliff-hanger, with a risk of a government shutdown early next week. Although this is not our baseline scenario, in case markets are freaked out by a government shutdown we could see global markets shifting to risk-off mode.
Next week´s key events US The coming week’s calendar, while sizeable, has mostly second-tier data releases, but there will be plenty of Fed speakers to keep markets busy. Look out for hints on the subject of tapering. Euro zone …
A few reflections after yesterday’s surprise from the Fed and the implications for our financial forecast.
The Fed unexpectedly refrained from tapering its asset purchases today. Despite the surprise we believe that tapering will start soon. However, the Fed seems likely to wait until the December meeting before making such a decision.
All eyes on the FOMC meeting next week. We expect the Fed to reduce the pace of its monthly bond purchases by USD 15bn, to USD 70bn. Focus will also be on Norges Bank interest rate meeting. Stay tuned for an exciting next week!
We still expect the FOMC to agree on a modest tapering of its monthly purchases at next week’s highly anticipated meeting but also to provide a stronger commitment to a low fed funds rate for an extended period.
We have updated out financial forecasts. There are both changes to rates and FX.
Despite today’s disappointing US employment report we stick to our call that the Fed will opt for tapering its USD 85bn in monthly asset purchases later this month.
With all focus still on Fed tapering, markets are obviously still very sensitive to incoming economic data. In the light of that, retail sales and consumer confidence are on top of next week’s US agenda. In addition, industrial production numbers from the Euro zone, unemployment from Sweden and much more. Stay tuned for an exciting week!
Six out of the G10 central banks will meet for policy rate decisions next week. Besides that, the employment report and ISM from the US will take center stage on next week´s agenda.
Next week´s key events US There is plenty of data from the US in the coming week, with durable goods, PCE inflation and revised Q2 GDP on the agenda. The rate sell-off has made it costly to go for …
The Fed appears on track to slow its bond purchases before the end of this year if the economy continues to improve. But the central bank remains divided over the exact timing of the move. That’s the message from the minutes of the 30-31 July FOMC meeting.
Here is our new financial forecasts. We have revised our 3-months yield forecast in the US and the Euro-zone higher.
Over the next few months financial market participants are likely to shift their attention to the continuing fiscal soap opera in Washington DC. We expect the debt ceiling and the other fiscal issues to be solved with relatively little drama, but we could see some short-lived market volatility in the run-up to a deal.
As Northern Europe slowly returns to work after the holiday, in this short note we try to summarize our current stance on the global economic cycle and financial markets.
In this short presentation, we’ve tried to highlight some of the major economic and financial market events that has happened over the past few weeks. Hopefully, it will make returning to work just slightly more easy.
Today the Fed offered no hint of tapering later this year and its statement took on a slightly more dovish tone on inflation. However, we still expect tapering to begin in September, but it is a closer call.
The fact that the US recovery gained momentum in Q2 despite heavy headwinds suggests the economy could accelerate later this year as the drag from fiscal tightening fades and pent-up demand is released.
The Fed is likely to move one step closer tomorrow to scaling down QE3.
Currently financial markets seem rather complacent about the Fed chairman succession question, but there is a clear risk that speculation on Bernanke’s successor will trigger more market uncertainties in coming months.
Here is an overview of our financial forecasts. Read the full report in the attachment or the bullets for a summary.
Here is a overview of our financial forecasts. We have made minor changes to the US rates and the commodities forecasts, and we summarize last week's FX forecast changes.
The Fed signalled today that it is on track to begin scaling back its bond purchases later this year if the economy doesn’t disappoint.
Attention in global markets is firmed fixed on the Fed, with focus on how and when it will scale down its pace of bond purchases. Potential tapering of the Fed’s QE programme, which has recently boosted market volatility, is likely to remain a dominant theme in the near term, but we see this only as a precursor to increased market focus on the Fed’s eventual exit from its ultra-easy policy stance.
Abenomics is exactly the right medicine for Japan. If implemented as outlined, chances are good that the radical regime shift will end the protracted aversion to debt in Japanese households and businesses. However, without structural reform to increase potential growth the first two arrows of Abenomics only increase the risk of a severe debt crisis in Japan.
Fed chairman Bernanke's highly expected testimony suggested that the Fed still has little appetite for a slowing of the central bank’s bond purchases. Nevertheless, we still believe tapering could start by the September FOMC meeting.
With Fed appearing somewhat more inclined towards QE-tapering than previously signaled, we bring down our 3 month EURUSD forecast to 1.32. We also adjust our Brent Q2 forecast down to USD 105/bbl.
The Fed left policy unchanged as widely expected, but said the pace of QE could be either increased or decreased. This marks a slightly dovish shift from earlier this year.
Despite the recent round of weak data we do not expect an overly dovish tone to the post-meeting statement tomorrow. Still, a potential surprise would be if the FOMC is worried about disinflation.
The reason for our optimism is that private-sector deleveraging, which has been the most important factor holding back the US recovery over the past four years, seems to be over. Very importantly, the US consumer is back as Q4 2012 seems to mark an important economic turning with the end of household deleveraging.
We have made a number of adjustments to our financial forecasts including US rates, EUR/USD, GBP, CHF, JPY and base metals. The big story is unchanged!
Today’s US employment report supports our expectation of yet another spring slowdown in growth.
Risk appetite in general has been surprisingly resilient to adverse events in the past few months.
We forecast a 175k rise in US payrolls in March. An outcome in line with our forecast will support our expectation of yet another spring slowdown in growth.
We expect US economic data generally to disappoint compared to consensus estimates over the next few months as the sequester kicks in. As a consequence, we see increased risks of a temporary reversal of some the recent increase in risk appetite in financial markets.
As expected, the Fed left its policy and forward guidance unchanged at today’s FOMC meeting. Regarding QE3, there was no change in the wording of the statement to signal plans to scale down the Fed’s asset purchases yet. The FOMC's new unemployment projection is still consistent with no hike rate at least until late 2015.
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook. We have changed our forecast for the Fed, the BoE, the SNB, Riksbanken, Euro rates, USD rates, EUR/USD, JPY, GBP, SEK, NOK, oil and the base metals.
Due to the strength of underlying fundamentals in the US economy, an elevated structural level of unemployment and the Fed credibly aiming for higher inflation we expect the US yield curve to continue steepening over the coming year or so as markets price in higher inflation.
With much improved economic fundamentals and significantly diminished policy risks the stage is set for a much stronger US economy in 2013 and 2014, but not without bumps along the road.
Our expectations for next week’s FOMC meeting.
US policymakers failed this time to reach a last-minute agreement averting the so-called sequester cuts. But the fiscal battle doesn’t end here. A timeline of key events related to the impending fiscal debate is provided in this post.
Fed Chairman Bernanke defended today the central bank’s asset purchases and said that they are still merited. With no new policy signals we still believe that the Fed is unlikely to scale down QE3 over the next few months.
I put the odds of the full sequester spending cuts going through on 1 March at more than 50%. Moreover, I expect most of the cuts to be sticking. I expect such an outcome to be slightly negative for risky assets and slightly positive for US Treasuries and the USD.
Risk sentiment has continued to mostly thrive lately. Improving economic data and continued easy monetary policy should still to provide support, but an increasing amount of event risk and uncertainty in the near future should lead to temporary profit taking and a correction lower in equity prices.
This is a regular monthly update of our financial forecasts. See the summary below or the full report via the link. Markets have settled a bit since our 29 Jan update (Markets getting too far ahead of economies). Still, we …
De finansielle markeder vil være præget af risikovillighed i den nærmeste fremtid. Men som følge af manglen på fundamentale forbedringer venter vi en korrektion i løbet af foråret.
Today’s FOMC meeting was a non-event, leaving monetary policy and the forward guidance unchanged as widely expected.
Today’s Q4 GDP report will likely prompt recession talk in financial markets, but we are pretty sure that the US economy is not on the verge of a new contraction.
Tomorrow’s FOMC meeting is likely to be a non-event. Q4 US GDP growth is likely to be weak, but the breakdown should contain some positives.
Risk-on is likely to dominate in the very near-term but given the lack of fundamental improvements we expect to see a correction sometime during the spring.
Recent political events in Washington have made the global economy somewhat safer. Thus, while we continue to see policy-related downside risks to our 2.1% GDP growth forecast for 2013, these risks have diminished significantly over the past few weeks because the threat from both the fiscal cliff and the debt ceiling has been addressed.
We have only made minor changes to the financial forecasts this time: We have lifted our mid-year target for the EUR/USD to 1.25, made minor changes to the GBP forecast, lowered our 3M EUR/SEK forecast to 8.60 and we have postponed the first hike from Norges Bank to March 2014 and only expect two hikes in 2014.
We estimate that a fiscal deal including a timely increase of the debt limit ensuring that all scheduled payments are met as well as further deficit reductions of USD 1-1½trn over ten years will be enough to prevent new rating downgrades of US debt.
US jobs data highlight why we are increasingly sceptical of the Fed’s indications that it will keep the funds rate near zero for at least 2½ more years.
The last-minute fiscal cliff deal is clearly a relief because it helps the US to steer clear of recession. However, while the fiscal cliff is now history, we will likely face another fiscal battle in Washington in just a few weeks’ time, with potentially negative consequences for confidence.