SWEDEN: Q4 Flash GDP Misses Riksbank Projection, 25bp Cut Expected This Morning
This morning’s growth and lending data won’t affect the outcome of today’s Riksbank decision, where a 25bp cut is widely expected. The Q4 flash GDP indicator was 0.2% Q/Q (vs 0.3% cons and prior) and 1.1% Y/Y (vs 1.1% cons, 0.7% prior). This was below the Riksbank’s 0.4% Q/Q and 1.2% Y/Y forecast from the December MPR.
- As always, the flash GDP reading should be taken with a generous pinch of salt – it has been prone to large revisions in recent quarters.
- Following a weak October, the November and December readings helped growth inch into positive territory in Q4. The December monthly GDP indicator was 0.7% M/M (vs 1.3% in Nov, -0.3% Oct).
- No details are provided with the flash releases, with December consumption and private sector production data due on Feb 10.
- Riksbank policy rate cuts have started to feed through to household and business lending. In December, household lending (the majority of which is mortgage lending) grew 1.6% Y/Y for the second consecutive month. Meanwhile, business lending was -0.8% Y/Y (vs -1.4% prior), the highest reading since December 2023.
- See here for MNI’s preview of the Riksbank decision at 0830GMT/0930CET
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CROSS ASSET: Markets Pick Up Where They Left Off
Markets have generally picked up where they left off on Friday - although the US 10y yield has drifted off the closing high to trade back to 4.60%, a move that's likely keeping the USD pinned so far Monday, helping the likes of AUD/USD and NZD/USD to hold above the recent pullback lows.
- Equity futures remain lower across the board, with US index futures pointing to another lower open today to build on the softer Friday close. Meanwhile Bund futures are off the lowest levels, but remain perilously close to 132.71, the December low posted at the re-opening of trade after the weekend.
- Significant newsflow has been few and far between, with US domestic politics focusing on the internal Republican debate over H-1B visas and the passing of President Carter.
- Focus for the duration of Monday trade will be on the MNI Chicago PMI at 1445GMT, expected to tick up to 43.0 from 40.2 previously.
- We anticipate volumes and broader liquidity to remain very light over the coming two sessions, particularly with tomorrow's European market closures and early closes elsewhere. EUR futures are posting cumulative volumes ~30% below an already subdued average for this time of day.
BTP TECHS: (H5) Bears Remain In The Driver’s Seat
- RES 4: 123.34 High Dec 11 and key resistance
- RES 3: 122.85 High Dec 12
- RES 2: 121.94 High Dec 13
- RES 1: 120.70/121.14 High Dec 20 / 20-day EMA
- PRICE: 119.85 @ Close Dec 27
- SUP 1: 119.41 Low Dec 27
- SUP 2: 119.11 Low Nov 18
- SUP 3: 118.80 76.4% retracement of the Nov 7 - Dec 11 bull cycle
- SUP 4: 118.51 Low Nov 8
A corrective cycle in BTP futures has resulted in a pullback from its recent highs and Friday’s sell-off highlights and extension of the current bear cycle. The contract has recently breached the 20-day EMA and sights are on 118.80, a Fibonacci retracement point. Key resistance and the bull trigger has been defined at 123.34, the Dec 11 high. Initial firm resistance is seen at 121.14, the 20-day EMA.
GILT TECHS: (H5) Impulsive Bear Cycle Extends
- RES 4: 94.50 High Dec 16
- RES 3: 93.64 High Dec 17
- RES 2: 93.38/59 High Dec 18 / 20-day EMA
- RES 1: 93.09 High Dec 21
- PRICE: 91.84 @ Close Dec 27
- SUP 1: 91.64 Low Dec 19
- SUP 2: 91.58 4.382 proj of the Dec 3 - 4 - 5 minor price swing
- SUP 3: 91.45 4.500 proj of the Dec 3 - 4 - 5 minor price swing
- SUP 4: 91.33 4.618 proj of the Dec 3 - 4 - 5 minor price swing
A strong bearish theme in Gilt futures remains in play and Friday’s move low reinforces this condition. The breach of 91.87, the Dec 19 low, confirms a resumption of the downtrend. Sights are on 91.58 next, a 4.382 projection of the Dec 3 - 4 - 5 minor price swing. Initial firm resistance is at 93.09, the Dec 20 high. Short-term gains would be considered corrective. Resistance at the 20-day EMA, is at 93.59.
