Market movers today
Today’s highlight will be the ECB minutes from the 4 June meeting, when the ECB enlarged the PEPP envelope to EUR1350bn. We will look for discussions about the economic outlook and policy responses. Furthermore, in light of the German constitutional court case (GCC), the discussion about proportionality of the monetary policy stimuli (increase in package) and also if the GCC case was discussed will be monitored.
In the US, we get PCE core, consumption and US jobless claims. We continue to examine if continued claims will fall, after they stabilised above 20m in the past week. We already know that retail sales improved more than expected in May, so it will be interesting to see if consumption followed.
No major Scandi events beyond Danish retail sales; our own Spending Monitor (23 June) suggests card spending has stabilised at normal levels but has failed to improve further of late.
Selected market news
Virus woes are taking their toll on risk assets on a broader note. Equities fell markedly in the US session with S&P closing down close to 2.6% and the sell-off continued in Asian hours with Nikkei down 1.2% at the time of writing; Chinese indices have held up better and are mixed on the day. US credit indices also weakened and the dollar strengthened with EUR/USD below 1.1250 again. Scandi currencies were sold off with EUR/NOK touching 10.90. Crude oil prices also gave in and Brent fell towards USD40/bbl, further weighed by continued US stock builds. US Treasury yields generally under pressure with the 10Y falling below 0.67% yesterday, while the 5Y point held up well.
Several US states are reporting an accelerating number of COVID-19 cases: the number of new daily cases in the US is closing in on the highs of late April – notably states in the south and west registered a record number of cases on Wednesday. It will now be crucial to keep an eye on the rising number of hospitalisations as this will likely determine whether new extensive lockdowns will have to be put in place and/or reopenings stalled further, as has already been seen in several US states lately. A few states including New York have already imposed new quarantine rules for travellers from high-infection states. It remains up to each state how to handle this.
Adding to worsening sentiment was the news that the US will impose tariffs on a range of European goods. While the list of targeted items remains relatively contained together with Pentagon unveiling a list of Chinese companies thought to be controlled by military added to geopolitical strains looming in the background of the virus-related risk sell-off. Meanwhile, Fitch downgraded Canada which thus became the first country to lose its AAA rating due to a coronavirus-fuelled surge in government spending.
