Market movers today

It’s a quiet day in Europe, with weekly US initial jobless claims as the data highlight of the day. Jobless claims will likely extend their downtrend, as the expiration of the extra weekly USD600 benefits could discourage some Americans from filing. Meanwhile a deal on a new US stimulus bill remains yet elusive, despite Trump’s executive orders, leaving income uncertainty for many Americans high. This is also reflected in the latest US high frequency indicators, which remain at very depressed levels compared to Europe (see High Frequency Activity Tracker – Europe nearing normality).

In Scandinavia, quarterly consumer confidence is due in Norway, while in Sweden, Prospera publishes monthly survey for inflation expectations among money market players (see page 2 for more details).

- advertisement -

Selected market news

The global equity market rally continued yesterday in the US and overnight in Asia with the S&P 500 up almost 1.5% and the Nikkei index up almost 2% in Japan. Along with the sustained equity rally, global yields have started to climb higher and yesterday was generally not an exception (see fixed income section on page 2 for further discussion).

The global reflation scenario got further impetus from a surprise jump in inflation in the US and Sweden yesterday. US CPI inflation was a bit higher than expected in July, arriving at 1.0% y/y (vs. 0.7% consensus). The acceleration was primarily driven by core items, notably vehicle prices, transportation services and airfares. We think that the Fed will keep an eye on emerging price pressures, but that these pressures are unlikely to detain it from strengthening its forward guidance at the September meeting. Not least if the adoption of average inflation targeting (which we expect) will lead to a more relaxed attitude towards inflation overshooting the target after many years of undershooting.

Also in Sweden, inflation came out much higher than expected. The CPIF 0.5% yoy vs consensus of 0.2% while the Riksbank forecast was 0.0%. The CPIF ex energy was 1.5% yoy vs consensus of 1.2%. The unexpected inflation jump was explained by smaller than expected clothing sales and unseasonal rise in hotel and restaurant prices.

Our latest weekly overview of high-frequency indicators point to further normalisation of economic activity in Europe. For the first time since March, the Bundesbank weekly activity index was positive, indicating economic improvement in Germany. Google mobility numbers have also improved and are back to near-normal levels in large parts of Europe. Spain and the UK lag behind in this regard, largely because of the stringency of their efforts to control the virus and the US economy is also facing headwinds from the virus.

The headwinds for the U.K. economy were evident from the release of Q2 GDP numbers yesterday. The release showed that the UK economy shrank 20.4% in the second quarter from the previous quarter, double the contraction seen in Germany and the US and the most since the record began in 1955. The weakness of the UK economy adds pressure on the government to continue to support workers and companies.


Previous articleUpcoming Focal Points Include China Data
Next articleCore Bonds Slipped
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.