Market movers today
Today the ZEW figures will give us a first glimpse of what is in store for the German manufacturing sector in October. The rebound has been quite solid so far but with mixed signals in September as industrial production actually declined.
We will also look out for IMF’s World Economic Outlook and the UK jobs report.
The 60 second overview
US presidential election. While US President Trump returned to his campaign trail after he was declared contagious-free from his COVID-19 illness, the US media channel FiveThirtyEight reported Biden’s prospect of winning the electoral college has risen to a record high of 86%, with a predicted 352 electoral votes (of the 538). Further, the disagreement over potential new fiscal stimuli in the US prevails.
Turkey. Tensions are rising yet again in the Middle East with Turkish products being informally banned in Saudi Arabia. The much tested area has seen rising tensions and Turkey is seemingly caught in a maelstrom, which poses a risk of spreading into financial markets.
Equities. Global equity markets had a strong session yesterday driven by tech stocks. The Nasdaq index ended 2.6% higher, after touching +4% intraday. The rally comes after days of strong performance on supported risk sentiment. The Asian session is in green this morning.
FI. EGBs rallied across the board yesterday. With no new triggers, the low volatility, high excess liquidity and carry-friendly environment supported the performance while the US were out for a holiday. BTPs and Greece led the performance by around 5bp lower yields. Spreads tightened with notably the 10Y BTP-Bunds spreads continuing to print another record-low touching 122bp.
FX. In FX, yesterday’s strong US tech stock performance had two opposing impacts on EUR/USD. On the one hand, risk-on supported the cross, while on the other hand USD buying kept the cross in check. Overall, as with most other dollar-pairs, EUR/USD was little changed in a session primarily characterised by Eastern European selloffs in CZK and HUF.
Credit. Credit markets followed the good mood across markets where iTraxx Xover tightened 8.5bp to 307bp while Main tightened 1bp to 51bp.
Along with equities, credit enjoyed a good ride yesterday, with both cash bonds and CDS indices tightening. iTraxx Xover tightened 8bp and Main tightened 1bp, while their cash counterparts saw smaller changes, tightening 3bp and 1bp, respectively. Tomorrow is the first day of reporting season, with several US issuers set to publish Q3 results, including JP Morgan and Delta Airlines.
Nordic macro and markets
In Sweden, September inflation is in focus today. Drawing on the outcomes in Norway and Denmark it seems as if there is a significant (about 0.25 p.p.) downside to our forecast (CPIF +0.4% m/m /0.7% y/y and CPIF excl. Energy +0.5% m/m /1.4% y/y). In particular clothing prices appear to have risen much less than normal, probably a result of weak sales related to COVID-19.
Riksbank is set to buy SEK2bn munis, KI 2311 and 2505.