Market movers today
There are no significant economic releases today. The key focus in financial markets will be signs of a second virus wave in the most populous US states of Texas, Florida and California and the associated fears of renewed lockdowns. China is also seeing renewed virus problems in Beijing, which led to school closings yesterday.
In Sweden, the labour force survey is released, where especially actual working hours and the spread between employment and ‘at work’ are in focus (see page 2 for details).
Selected market news
Yesterday we got the June ZEW indices out of Germany. Expectations extended their rebound and rose for the third month in a row. According to ZEW, the euro economy has already moved into upswing territory, but this month the current situation assessment also registered an increase for the first time since January, which is strengthening the recovery signal.
In the US, retail sales rebounded 11% in May and April was revised ups This morning, Asian stock markets took a breather after the last two days’ rallyignificantly, another sign that the worst is over in the US, although the level remains subdued. The big question now is whether the rebound can continue. The experience from Denmark has been good with private consumption back at normal levels in June, see Spending Monitor, 16 June, for more. The situation is different in the US, though, because the reopening of the economy happened before the virus was under control. Manufacturing production is another story. A 3.8% increase in May but April declined by 15.5%, no V-shaped recovery here.
Yesterday in Fed’s semi-annual report to Congress, Chairman Powell played down the significance of the Fed’s decision to begin buying corporate bonds, interesting comment considering how markets rallied on the comment early this week. Talking about the Fed, today we published our Fed Monitor: A primer on the Fed’s discussions on changing its forward guidance, where we take a closer look at (in particular) yield curve control (YCC) and average inflation targeting. We argue that the latter (outcome-based forward guidance) is stronger than the former (time-based forward guidance). Our new Fed call is that we expect the Fed to introduce a combination of YCC and average inflation targeting at its meeting in September. We see the probability of the Fed introducing YCC without linking it to inflation outcome as relatively small.
In other good news, the cheap steroid Dexamethasone has been found to reduce deaths by one-third in ventilated patients and by one-fifth in patients receiving oxygen, according to the results of a Recovery trial led by Oxford University. There was no benefit found among patients who were not receiving ventilatory support. ‘It works for the sickest patients, which is exactly what one would hope for’, said Martin Landray, professor and deputy chief investigator of the Recovery trial.
This morning, Asian stock markets took a breather after the last two days’ rally despite the good news on Dexamethasone. Second-wave fears still linger but also 20 killed Indian soldiers in clashes with Chinese troops might have dampened market sentiment.
