Market movers today
- The German ifo index will provide more information on how big a hit to the economy we are likely to see in the short term.
- US consumer confidence for November is expected to have declined following the recent rise in COVID-19 infections and US election turmoil.
- The Richmond Fed index is also projected to drop in November as was the case with the Philadelphia Fed survey and the Empire index.
- Brexit talks and COVID-19 news remain on the watch list.
The 60 second overview
Vaccine and treatment news. AstraZeneca released some positive news yesterday. According to interim late phase 3 results, the AstraZeneca vaccine has an average efficacy of 70%. While this is lower than Pfizer’s and Moderna’s vaccine candidates, the devil is in the detail. With a total of ‘one and a half’ doses (beginning with a half dose, then a full dose one month later), the efficacy is shown to be 90% versus 62% when receiving two full doses two months apart. Also AstraZeneca did not report any severe side effects. The results may sound disappointing but remember we would have been cheering about 70% less than a month ago (compare it to 40-60% for a normal flu shot). The AstraZeneca vaccine also has some other advantages: the price is much lower (3-4 dollars), the vaccine can be stored at much higher temperatures (2-8 degrees Celsius for six months) and production capacity is much higher (3 billion doses next year versus Pfizer’s 1.3 billion and Moderna’s 0.5-1.0 billion). We published our take on where we are with the vaccine development and where we are heading in COVID-19 Research: Vaccine development – where are we and where are we heading?, 23 November.
US. Former Federal Reserve chair and head of White House Council of Economic Advisors, Janet Yellen, is said to be Joe Biden’s pick for Treasury secretary. She would be the first person to take up all of the three mentioned roles and thus a highly experienced candidate.
Equities. US and Asian equities rose overnight as more positive vaccine news and better than expected US PMI data paved the way for optimism in markets.
FI. European rates stayed within a tight range yesterday of around 2bp from lows to highs, in absence of significant market news. Bund ASW barely moved. The euro area PMIs, which fell back into contractionary territory due to slower manufacturing growth and declines in services, did not change market appetite. Peripheral spreads continue to grind tighter, while core/ semi-core spreads to Bunds were largely unchanged on the day.
FX. Yesterday’s big release was PMIs. While weak European data did little to rock the boat, we saw EUR/USD sharply lower following strong US data releases. Brexit – not relative data surprises – is more likely to set the scene in the coming two weeks. In a surprise announcement Norges Bank (NB) yesterday announced a reduction in the daily NOK purchase amount from NOK1.6bn to NOK500M. For now, the announcement is a clear negative for spot NOK FX.
Credit. Despite some late-session softening, credit markets were in a cheery mood yesterday, where iTraxx Xover tightened to 276bp (-6bp) and Main to 51bp (-1bp). Cash bonds were also in high demand with HY tightening c.4bp and IG around 1bp.
Nordic macro and markets
Denmark. Imputed prices and tobacco taxes have prevented deflation in Denmark during the crisis this far. We are looking for a modest inflation pickup over the coming years and we expect volatility to increase as the consumption pattern for 2020 affects CPI weights. We have taken a closer look in Research Denmark: Modest inflation pickup and choppy waters ahead, 24 November.
Norway. Yesterday, Norges Bank surprised markets by announcing a lower NOK purchase amount. For our take see FX Brief: Norges Bank cuts NOK buying in surprise move, 23 November.
