Market movers today
The minutes from the ECB September meeting are due for release today. At the press conference, President Lagarde gave no indication of rising concerns about the inflation outlook nor signalled any potential for further stimulus in the near term. However, the minutes are set to reveal how split the Governing Council is on these topics.
US initial jobless claims will reveal how the US labour market started October, now that US President Trumps ended talks on another fiscal stimulus package.
Norway’s monthly GDP for August and Sweden’s monthly indicator are set to reveal more about the size of the Q3 rebound.
The 60 second overview
FOMC minutes. As expected, yesterday’s release of the FOMC minutes was uneventful. That said, it is clear from both the minutes and recent speeches that the Fed really wants Congress to do its fair share of supporting the economy by easing fiscal policy, as the Fed (without stating it) fears it is running out of ammunition. Unfortunately, more fiscal easing seems unlikely on this side of the election after President Donald Trump called off the negotiations on another relief package. This may increase the pressure on the Fed to increase its QE buying pace but it would probably take a deterioration of economic fundamentals for this to happen (it may happen in-between meetings, as the Fed says it will buy ‘at least at the current pace’).
Fiscal stimulus. Spain unveiled a EUR72bn stimulus plan to cover 2021-23 to help the economy back on its feet. Around 80% of the money will come from the EU recovery fund. The government hopes the measures will lift GDP by an additional 2.5% and create some 800,000 jobs through 2023.
Equities. US equities markets recovered some ground yesterday, with S&P 500 gaining 1.7% after comments from President Trump seemingly backed a piecemeal approach to fiscal stimulus and new polls showed Democratic candidate Joe Biden in a firm lead against Trump. In a sign that yesterday’s rally will extend, Asian shares are flashing green this morning and S&P 500 E-mini futures also point to a higher opening.
FI. The US curve continues to steepen from the long end with the 2-10Y steepening some 8bp since October 1 and the 10Y-30Y steepening 3bp. We could see more steepening pressure given the comments from the FOMC minutes regarding adding fiscal stimulus, and with Biden leading the US presidential election and the potential for more fiscal stimulus. We have the ECB minutes today and markets will be looking for comments on expansion of the QE programme as well as other signals regarding monetary policy including average inflation targeting. Given the ongoing steepening of the US Treasury curve, both the EUR swap curve and the German curve are likely to steepen as well, but at a more modest pace.
FX. As the FOMC minutes contained no new information, there is nothing to write home about in FX space. As risk was overall fine yesterday, EUR/USD moved slightly higher and both EUR/NOK and EUR/SEK slightly lower. EUR/GBP ended the day where it started, slightly above 0.91, after both positive and negative Brexit headlines during the day.
Credit. Yesterday was another good day in EUR credit markets, with iTraxx Xover tightening 6bp to 317bp and Main ending 1bp lower at 53bp.
Nordic macro and markets
In Norway, monthly GDP-figures will probably confirm a continued recovery, albeit at a moderately slower pace. We expect a fresh downturn in parts of the hotel and restaurant sector and consumption of goods correcting after the summer strength. On the other hand, the rebound in manufacturing activity is getting stronger. Therefore, we expect mainland GDP climbed 0.8 % m/m in August.
In Sweden, the August Activity indicator (monthly GDP proxy) is released at 10.00 CEST. We expect a print just marginally higher than in July, supporting the idea of a Q3 GDP c.5% up q/q.
