Market movers today

In Scandinavia, we get the Swedish inflation figures for July, and we expect a significant deviation from the usual seasonal pattern with bigger clothing sales and a marked drop in energy prices. Hence, we look for core CPIF excl. energy to dip down 0.3 percentage points to 1.0%, a 10th below the Riksbank’s forecast.

Q2 GDP figures will be released for the UK, likely showing a sharp contraction of over -20% q/q according to consensus.

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Judging from the country figures, euro area industrial production figures for June should show another sizable improvement in activity, although not quite back to pre-crisis levels.

Comments from a range of Fed speakers in the afternoon will also be scrutinized by markets, as the Fed gears up for strengthening its forward guidance at the September meeting.

Selected market news

On markets, the big story yesterday was the move higher in bond yields. The 10Y US Treasury yield rose to 0.65% – the highest level since early July – driven by a move higher in both real interest rates as well as breakeven inflation expectations. The move spilled over to the European bond market, but also took its toll on FX markets, where it ignited a rebound in the broad USD notably taking USD/JPY firmly above 1.06 level.

On the monetary policy front, Atlanta Fed President Thomas Barkin yesterday argued that the resurgence of the virus in the US had “flattened out momentum”. He further warned against removing fiscal support stressing “the fiscal side is unclear”.

On the trade side, US top economic advisor Larry Kudlow said on Tuesday that the trade deal between US and China is “fine” and China is “substantially” increasing purchases of US goods.

On COVID-19 developments, US President Donald Trump said Moderna will manufacture and deliver 100mn doses of vaccine to the Federal Government.

Finally, on the US presidential election, Democrat presidential candidate Joe Biden yesterday announced that Senator Kamala Harris from California will be his pick for Vice President. Harris then becomes the first Black woman and first Asian-American on major party presidential ticket.

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