Market movers today
Markets will be digesting the message from yesterday’s FOMC meeting.
We will look out for the euro area finance ministers’ meeting today where they are set to discuss the EU’s recovery package and Eurogroup presidency succession.
In the US, we get weekly claims data. Claims were not exactly a good predictor of nonfarm payrolls in May but nonetheless focus will remain on whether the positive signals from the US labour market continue.
Danske’s forecast of Swedish inflation is at the lower end of the market. As all forecasts are well below the average of Riksbank’s ‘scenarios’, significant negative print is needed to move the market today.
Selected market news
The key event yesterday was the US FOMC meeting. Here, Mr. Powell re-iterated policy rates are set to remain at rock bottom for the years to come and the Fed is ‘not even thinking about thinking about raising interest rates’. The key discussion among markets and macroeconomists alike remains whether or not this policy guidance will be able to create inflation down the line. The immediate effect seems to be one more notch in the belt in favour of ‘stagnation forever.’ Indeed, the IT sector, which tends to do well in a low-rate and mediocre-growth scenario, was well into the green. In FX, the picture was somewhat mixed but the USD seems to still be on a declining path against most currencies. Meanwhile, yields all the way to 10 years out remain depressed and fell a bit. We suspect the world’s biggest central bank may indeed be able to erode some of the past year’s broad USD strength, helping global growth, debt burdens, commodity prices and demand. In turn, we remain constructively positive on cyclical sectors such as banks and industrials. Scandinavian SEK and NOK should also be able to strengthen further in this environment, while we expect EUR/USD to rise to 1.15 near term.
The main event in the European market will be the Eurogroup meeting, where the finance ministers are expected to discuss the EU recovery fund. Given the differences between the EU commission and e.g. the Netherlands and Austria, the proposal for the recovery fund needs some work before it can be passed in the various parliaments.
Chinese credit data released yesterday still point to decent policy support. The data were lifted by financing of infrastructure (new and old) investments and probably also more credit to liquidity-squeezed companies. The data are in line with what we are seeing in the US and Europe where monetary aggregates are expanding heavily as well.
Overnight, markets opened up a bit negative. US, European and Asian equity futures are down some 1-2% and dollar is generally rising a bit versus both commodity currencies and emerging markets.
