Danske Daily
Today's Key Points
- Stable development in bond yields, equities and FX overnight
- Watch out for the ECB LTRO auction today
Markets Overnight
After a day with mixed data in the US - improving house prices, but deteriorating consumer confidence - bond yields ended the day at almost unchanged levels. The 2yr US Treasury bond trades at 1% and the 10yr bond offers a yield of 3.30%. The market is no doubt trading in suspense of the ISM and non-farm payrolls data due out later this week.
We note the comments made by Fed member Fisher, yesterday, that the house market is still on life support and that the market will have to step up to buy MBS in March when the Fed phases out its purchases. He also reiterated Warsh's message last week that tightening could be equal in speed and intensity if needed.
The equity market retreated a bit in yesterday's US session. The S&P500 came down 0.2% and Nasdaq lost 0.3%. So far this morning the Nikkei index is close to unchanged.
On the FX markets EUR/USD has recovered and is once again above 146 as it trades around 146.2. EUR/JPY and the Scandinavian crosses have remained fairly stable overnight
Global Daily
Focus today: With the huge focus on the US labour market at the moment the ADP employment data are probably the most interesting number released today. ADP is a somewhat imperfect harbinger of what to expect from the all-important non-farm payrolls data on Friday.
In Euroland the flash estimate on September inflation will be released, while Kof is on the agenda in Switzerland.
Fixed income markets: The results of the 12-month ECB tender take centre stage and we expect it to set the tone on interest rate markets in Euroland today. The guesstimates on the amount given range from EUR80bn to above EUR300bn with most forecasts in the 100-200bn range. We are leaning towards a relatively low amount today, but the uncertainty is huge. A low number will send money market rates and short maturity yields higher - while a high amount will have the opposite effect. A small amount drawn will be seen as a sign of healing in the financial system and increase the likelihood of a spread being added at the next ECB 12-month tender in December.
Six ECB members will speak today, but we doubt any of them will say anything new. Two Fed members will also give speeches today
FX markets: Currently there is a lot of political and central bank focus on exchange rates. Yesterday we saw some rare political backing of the greenback from Trichet and fellow ECB member Nowotny. But also Sterling continues to attract a lot of attention. The market is still wondering if there will be a cut in the deposit rate anytime soon. However, the views expressed yesterday at a BoE seminar did not indicate that a cut was imminent. In fact we got another proof that the UK is certainly not as weak at the EUR/GBP might indicate as the final GDP numbers for Q2 surprised on the upside. Today we continue to look for central bank comments on exchange rates and exit strategies with ECB's Weber and Trichet on the wires. In addition, a busy data week kicks off today. The FX market will scrutinize the ADP report ahead of the non-farm payrolls report on Friday. The Chicago PMI also has the power to move the markets. Finally, the result of the ECB 1y tender has the power to impact risk appetite and exchange rates
Scandi Daily
In Norway we will see the release of retail sales and the credit indicator. We expect a marginal rise in retail sales in August of 0.3% m/m, but it comes after a strong rise of 2.4% in July and risk is on the downside. Credit growth is expected to slow further to 6.3% y/y in August from 6.3% in July.
Today's most important event might be the speech by central bank governor Gjedrem at 11.00 CET. If he wants to clarify the message from last week's monetary policy meeting this would be the perfect opportunity. If anything there is a possibility that he will warn that if NOK appreciates to strongly it will minimize the need for rate cuts.
In Sweden no key figures are due out today. The Debt Office will sell 3bn SEK 10yr benchmark bonds, though
Danske Bank
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