LONDON This week sees the first set of meetings between the top foreign and defence policy-makers of the Trump administration and their security counterparts in Europe, first at today's NATO meeting in Brussels, then at G20 talks and the annual Munich security gathering in Germany.
It comes at an awkward moment for the U.S. side, knocked off balance by the resignation of national security adviser Michael Flynn and new information that Donald Trump himself knew of Flynn's Russian contacts for weeks before.
Given Trump's campaign warnings of NATO's obsolescence, the Europeans will be at pains to tell Defence Secretary Jim Mattis that they are spending more on defence -- and seek reassurances from him that the alliance still matters. How that feeds into Western security policy on a range of issues from Russia to Syria and the fight against terrorism remains to be seen.
British unemployment data at 0930 GMT will be studied for signs that Britain's run of job creation, for years the envy of the continent, has petered out. Expectations are that a pick-up in the pace of pay growth also started to run out of steam late last year -- not good for consumers after yesterday's figures showing that inflation hit its highest level since mid-2014 thanks largely to sterling's weakness.
European Economic Commissioner Pierre Moscovici travels to Athens today for meetings with Prime Minister Alexis Tsipras to help narrow disagreements on Greek reforms needed to unblock further loans to the country and so avoid default. Moscovici is already out this morning speaking of some progress; however expectations of a deal before next Monday's meeting of eurozone finance ministers are being played down.
Asian stocks hit 19-month highs and European bourses are expected to open higher, the dollar is holding at 3 1/2-week highs against a currency basket and core bonds yields are pretty much where they were after Fed Chair Janet Yellen’s more hawkish than expected comments on U.S. rate hikes. Gold is down. Yellen’s comments, that it would be dangerous to raise rates too late, are still the main driver of markets on Wednesday. The Fed chief testifies to a different committee on Wednesday. Meanwhile, markets will check out U.S. inflation and retail sales data for any further clues to whether the Fed will hike next month. The CME’s Fedwatch tool still sees only an 18 percent chance of a move next month.
Before that, Sweden’s central bank announces its rate decision at 0830 GMT. No change expected.
The prospect of higher U.S. rates lifted banks on Wall Street and pushed all the main stock indexes to record highs. MSCI’s main Asia-Pacific exJapan index is up 0.7 percent and Tokyo closed 1 percent higher, led by insurers.
European stock futures are 0.4-0.5 percent higher. Banking stocks will be ones to watch, with Credit Agricole in particular in focus after France’s biggest retail bank beat forecasts with a smaller than expected drop in Q4, though it booked a writedown on the value of its French retail unit.
Other company news/stock movers: Heineken retains margin growth target for volatile 2017; ABN Amro Q4 earnings beat estimates on Dutch growth, lower provisions; Euronext's core profit stable on lower costs; Akzo Nobel fourth quarter operating income falls as currency effects weigh; Food group Danone unveils new cost cuts amid pressures at dairy arm and China; Schindler Holding FY 2016 results largely in line, China, India drag; UK restructuring, lower capital gains push down Ageas Q4 results; Shell, Eni ask Nigerian court to lift forfeiture on oilfield; U.S. judge grants preliminary approval to VW, Bosch settlements; Deutsche Bank fails to dismiss US currency rigging lawsuit.
The dollar index is up 0.1 percent, the yen is down 0.2 percent at 114.50 per dollar, the euro is flat at $1.0576 and sterling is down 0.1 percent at $1.2460. U.S. Treasury yields rose after Yellen’s comments and German Bund yields are marginally higher on Wednesday at 0.37 percent.
(Editing by Toby Chopra)