Market movers today

The ECB’s Watchers conference kicks off today. A range of prominent Governing Council members will be among the speakers including President Lagarde and Chief Economist Lane. Markets will look out for clues about the next policy steps amid growing divisions in the Governing Council.

French and Italian inflation figures will give important clues where euro area HICP for September is going to print on Friday.

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The day also brings a range of other macro figures in Europe (German retail sales, unemployment, French consumer spending) and the US (PCE core, ADP employment).

Later in the day the Fed minutes from the September meeting will provide more colour on FOMC members’ views on the new AIT framework and the need for more stimulus (see Fed Monitor: Glass half empty or half full, 16 September. Fed’s Kashkari, Bowman and Bullard are also out speaking.

In Denmark, property prices and unemployment figures for August are on the agenda.

The 60 second overview

US politics. The first debate between President Trump and Joe Biden did not provide much news as Trump and Biden kept interrupting and insulting each other. Hence, there was little debate on politics.

Equities. The rebound in the global equity market faded yesterday as we saw modest declines across US and EU equity markets, while the markets are awaiting more on the fiscal stimulus in the US. It is a mixed picture in the Asian equity markets.

FI. European yields continue to decline and spreads between core-EU and peripheral government bonds continue to tighten. Given the significant purchases from the ECB and the Federal Reserve, yields are likely to continue to be caught in a tight range with the short-term risk on the downside. In an article published this morning we look at how countries could deal with their post-coronavirus debt piles. We think it is important that governments find a way to make credible commitments to sustainable fiscal policies once their economies have returned to full employment. One way to do this could be through adopting national fiscal rules or strengthening efforts to lift potential growth. See Research Global: Public debt levels post COVID-19: much ado about nothing?.

FX. EUR/USD bounced almost a figure yesterday rising towards 1.1750 and USD/JPY edged higher despite first signs of faltering risk sentiment. The dollar generally stayed on a weak footing, while Scandies consolidated further after last week’s sell-off.

Credit. Secondary credit markets only saw small moves yesterday, with iTraxx Xover and Main 4bp and 1bp wider, respectively. Cash bonds, on the other hand, were slightly tighter and we saw good demand for Handelsbanken’s USD AT1 transaction, which was more than 5x oversubscribed.

Nordic macro and markets

In Sweden, NIER publishes updated economic forecasts. In the latest forecast (August) growth forecast was -4.8% 2020, which is similar to the government’s but well below the consensus (and the Riksbank). Data have if anything come out better since August, which makes us believe that NIER will revise its growth forecast for 2020 as well. Later in the day, Riksbank Jansson speaks about future reforms and challenges.

In Denmark, almost 400,000 people have applied for the payment of their holiday revenue. The payment of the holiday revenue is part of the government’s programme to boost the Danish economy. The payment so far corresponds to DKK7.1bn and as more people apply this number is expected to rise to up to DKK50-60bn.

In an article published this morning we look at how countries could deal with their post-coronavirus debt piles. We think it is important that governments find a way to make credible commitments to sustainable fiscal policies once their economies have returned to full employment. One way to do this could be through adopting national fiscal rules or strengthening efforts to lift potential growth.

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