Warsh’s Jackson Hole Speech Takes Centre Stage

In focus today

In Sweden, we first get the full GDP outcome for the second quarter, followed by the National Institute of Economic Research’s Economic Tendency Indicator. During the summer, all data outcomes have been surprisingly strong, and we expect today’s GDP figure to confirm the positive picture. The key focus will be household consumption, where the picture from retail sales and the household consumption indicator is unusually mixed. The National Institute of Economic Research’s indicator reached its highest level since 2022 in July. In July, responses were collected just after the peace agreement between Iran and the US. This time, responses were instead collected in early August. A slight decline from high levels would therefore not be unexpected, while a continued rise would be a sign of strength.

In Norway, we receive the August NAV unemployment figure. After Tuesday’s strong LFS figures it’ll be interesting to see if the NAV unemployment follows suit. We put more emphasis on the NAV, which rose slightly in July. Our expectation is 2.1% (s.a.), thus the same reading as July. Additionally, retail sales will be published today, we expect 0.0% m/m growth.

In the US, Fed’s annual Jackson Hole conference continues. The main market mover during the conference is Fed’s chairman Warsh speech today. Markets will look for any hints about monetary policy in September. We expect Warsh to continue his pattern of providing little to no forward guidance.

In the euro area, the first indications of August inflation are released, starting with France and Spain. We expect euro area inflation to rise to 3.4% y/y from 3.0% y/y, while core inflation is expected to remain unchanged at 2.5% y/y. The increase should be driven entirely by energy inflation, as pump prices are up 5% m/m for gasoline and 8% m/m for diesel. Core inflation momentum should remain muted, as also suggested by the PMI price components. Furthermore, we await the European Commission’s business survey for the euro area in August, with focus on firms’ selling price expectations. These have declined in recent months after rising in March and April. With services expectations now back at pre-war levels, further declines should reduce expectations for more than one additional 25bp ECB rate hike.

In China, the official NBS PMI data will be released overnight on Monday. The manufacturing PMI took a big dive in July to 49.2 reflecting the weakening of the economy over the summer. We look for a small lift in August as the decline looks too big compared to other indicators such as industrial metal prices and the high-frequency Yicai activity index, which have improved during August.

Economic and market news

What happened overnight

In Japan, Tokyo inflation for August was released overnight, with core CPI rising 1.8% y/y versus expectations of 1.7%, staying below 2% mainly due to energy subsidies. The index excluding fresh food and fuel rose 2.0% y/y, pointing to some broader price firmness, but domestic price pressure remains low and inflation is still largely an imported phenomenon rather than a reflection of strong domestic demand. As inflation is creeping towards the Bank of Japan’s 2% target, it will be closely scrutinised at the 17-18 September meeting, with broadening price pressures keeping the chance of a September rate hike alive.

What happened yesterday

In the euro area, the ECB’s July minutes confirm that a September rate hike is the baseline unless the inflation outlook improves significantly but offer no clear guidance beyond that. The relatively benign underlying inflation picture, with price pressures seen as mainly energy-driven and limited evidence of demand pressure or second-round effects, keeps the ECB in wait-and-see mode after September. EUR rates were largely unchanged after the release, as a September hike is already well priced. Due to more resilient growth in the euro area than expected, we have changed our ECB call, see Research Euro Area – New ECB call: No cuts in 2027, 27 August.

In Norway, mainland GDP rose 0.3% q/q in Q2, in line with our forecast but slightly below consensus and Norges Bank’s June MPR estimate, both at 0.4%. The deviation is too small to change our expectations for the September MPC meeting. Details were somewhat softer, with private consumption and corporate investments falling short of expectations, while public demand and mainland exports surprised to the upside. This suggests rate-sensitive sectors are under pressure, while more exogenous drivers are keeping activity afloat. Residential investment was the main exception, coming in slightly stronger than expected.

Equities: Buy AI and sell the rest. That was the market’s playbook yesterday, following Nvidia’s earnings ahead of open. The US tech sector jumped over 3%, while all other sector finished ~1-1.5% lower. Yet despite the broad weakness outside tech, the market showed no sign of a risk-off behaviour. In fact, the heaviest selling was concentrated in defensive sectors such as health care and consumer staples.

Nvidia climbed 8%, but the strength extended well beyond. Software was particularly strong, following a series of strong earnings that pushed back against the AI disruption narrative. Salesforce gained 22%, while cybersecurity company CrowdStrike rose 18%. Interestingly, semiconductors and memory names failed to participate. SK Hynix and Samsung are both down around 3% this morning, while Micron and AMD also traded lower yesterday. The disconnect between what the market pricing (which increasingly implies a rollover in memory prices) and bottom-up expectations and industry commentary, (including recent remarks from Nvidia’s CEO) is striking.

US futures are little changed this morning and Asian markets are mixed, and investors are likely to remain in wait-and-see mode ahead of Kevin Warsh’s Jackson Hole speech at 16.00 CET.

FI and FX: US Treasuries continues to range-trade as has been the case through most of August, with the 10y currently in the middle of the 4.60-4.75% range. EUR/USD hovers around 1.1650 and today all eyes will be on Warsh’s remarks at Jackson Hole, starting at 16.00 CET. We have a new ECB call, still seeing a final hike in September but no longer expecting cuts next year, meaning that the deposit rate will remain 2.50% all through 2027. The NOK found support in stronger oil prices, pulling EUR/NOK back below 10.90. Meanwhile, EUR/SEK continues to face strong resistance around the 11.10-level, pushing NOK/SEK above 1.02 once again.