Market movers today

Today’s most important releases are the flash PMIs for the euro area, including country-specific PMIs for France and Germany, and PMIs for the UK and the US for September. Although these will attract attention, we stress that PMIs are not the most accurate indicators in terms of GDP growth and we think one needs to analyse a range of indicators to get an idea of the current economic situation amid COVID-19.

There are several Fed speeches tonight, which are going to be interesting in the light of Evans’s hawkish comments yesterday. Fed chair Powell continues his Congressional hearing but we do not expect him to say anything of much significance.

- advertisement -

Finally, the German confidence indicator and the Norwegian labour force survey (July) are due out this morning at 08:00 CEST.

The 60 second overview

Fed. Chicago Fed President Charles Evans in a speech yesterday said that even if the Fed has now adopted flexible average inflation targeting (FAIT), it does not preclude raising rates before inflation starts averaging 2%. Following the Fed’s promise of near zero for an extended period, this was interpreted as somewhat hawkish.

US politics. Overnight the US House managed to pass a stopgap funding bill and thus avert a government shutdown. The bill keeps the government operating until 11 December. Meanwhile, the US Supreme Court judge fight continues and albeit president Trump has said he will name the successor of Ruth Bader Ginsburg this Saturday, it does seem to complicate the negotiations over another fiscal relief package.

Trade. US presidential candidate Joe Biden said yesterday that, if elected, he would end the ‘artificial trade war’ with the EU. While a harsh line against China is likely to be continued, Biden’s stance is a welcome message for the EU where digital services as well as the aircraft subsidies, cars and auto industry have been targeted trade-wise by the Trump administration.

Equities. After some stabilisation was seen in Europe yesterday, the US session posted decent gains with S&P500 up 1% on the day. Asia more mixed; Nikkei fell 0.3%.

FI. Mildly positive risk sentiment sent rates higher across the core and semi-core space. Italy led a rally by 5bp in the periphery after the market-friendly election outcome over the weekend. 3M Euribor-deposit spread continues to print negative. US Treasury yields in muted moves with the 10Y settling in the 0.67% area.

FX. USD strength has resumed and EUR/USD weakened to briefly dip below the 1.17 mark yesterday. The Riksbank message yesterday was largely SEK neutral; EUR/SEK remained bid, whereas EUR/NOK seemed to consolidate after the latest NOK sell-off. Unchanged rates in Hungary kept HUF on a weak footing.

Credit. Fairly muted moves in major indices following spread widening early in the week. iTraxx Main Europe remains in the 58 area, while Xover has settled around 332. US indices also generally ended the day little changed overnight.

Nordic macro and markets

Sweden. Yesterday’s Riksbank policy announcement had no meaningful market impact since it was broadly in line with expectations. However, it is worth noting that while most private banks tend to focus on recent signs of a V-shaped recovery, central banks – in this case the Riksbank – lean more towards the expectation that the economy will run well below full capacity for several years as a result of COVID-19, leading to the conclusion that the economy is in need of sustained stimulus both from monetary and fiscal policy. Thus, in spite of data showing a less deep dive than earlier, the policy stance was held unchanged with a ‘zero repo rate’ path through Q3 20 (end of forecast period) and indications that QE volumes of up to SEK500bn by June 2021 will probably be used to the full.


Previous articleRBNZ Holds Rates And Policy
Next articleSiemens Reversal Patterns Appear But Support And Uptrend Indicate Buys
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.