Market movers today
Today, focus is on final PMIs for October, including the first release of the PMIs in Italy, Spain, Norway and Sweden (as well as the release of US ISM manufacturing).
Besides that, we are looking forward to US Election Day tomorrow. We still believe a Democratic clean sweep is the most likely outcome. Whether we will know the election result already Wednesday morning (CET) depends on how close the case is, for instance we should get the results from Florida Wednesday morning and Trump’s winning path seems very, very difficult without Florida. We discuss further in US Election monitor: When will we know the winner? Well, that depends…, 30 October.
It will be interesting whether the Federal Reserve turns more dovish when it concludes its two-day meeting Thursday night. On Thursday, we also have the Norges Bank meeting.
On Friday, the US jobs report for October is due out.
Today at 12.30 CET we are hosting our fourth and final webinar ahead of the US election. This one is last minute predictions with veteran US election analysist Charlie Cook, on the outcome of the election based on latest polls over the weekend, timing of the election result in view of mail-in votes and possible scenarios after the election, which might be one of the most messy and most turbulent in US history. Charlie Cook is the Editor and Publisher of the Cook Political Report and a political analyst for the National Journal Group. He is also a political analyst for NBC News.
The 60 second overview
UK Prime Minister Boris Johnson over the weekend announced England will be joining large parts of the rest of Europe in starting a new lockdown of most of the economy. The lockdown is set to start on 5 November and last four weeks. As opposed to the lockdown in the spring, there will be waivers for schools and universities.
The oil price is suffering amid widespread economic lockdowns in Europe and a rising USD. Brent has dropped below USD37/bbl – the lowest level since May.
Brexit negotiators are apparently close to striking a deal over EU fishing rights in UK waters. It would be an important step towards a final Brexit deal by mid-November.
US elections are one day away and the Democratic Presidential candidate Joe Biden remains the favourite to win. Prediction markets put about a 63% chance on Biden winning tomorrow.
FI. The US election, rising infections and more lockdowns as well as Brexit uncertainty are all weighing on global financial markets, as well as affecting the positioning among investors. Currently, the uncertainty is hurting both global equity and bond markets given last week’s decline in global stock prices as well as rising long-term US Treasury yields. Last week 10Y US Treasury yields rose some 12bp from the mid-week lows of 0.75%. However, the 10Y German government bond yield is still stuck below -60bp, and 10Y Bund-Treasury spread has widened to a 6-month high of 150bp.
FX. Despite a continued equity sell-off on Friday FX spot moves proved fairly limited. EUR/USD continued to move lower reaching 1.1650 while both EUR/SEK and EUR/NOK came of recent highs. GBP gained on Brexit optimism with EUR/GBP temporarily breaking below 0.90.
Credit. Spreads drifted slightly wider on Friday, with iTraxx Xover and Main 3bp and 1bp wider, respectively. Cash bonds were also relatively soft and IG cash widened around 2bp, while HY cash widened 4bp.
Nordic macro and markets
We expect today’s manufacturing PMI to show a further rise in October following the lead from improving German PMI. We look favourably to the outlook as there is no evidence about new COVID-19-related supply disturbances. Services PMI has also recovered in line with manufacturing, but looking forward it is unclear to what extent COVID-19 might hamper at least part of the services industry.
