Market movers today
- The main market driver continues to be vaccine news and COVID-19 developments in the US and Europe.
- Norway and Sweden release retail sales for October today. The numbers are set to be a bit outdated, though, as any impact of COVID-19 is unlikely to show up until November, when we saw the biggest spread of the virus.
- In the euro area we get a batch of confidence data for both consumers and businesses for November. A decline is expected in both surveys.
- Brexit negotiations continue to be on the radar as the deadline approaches.
The 60 second overview
COVID-19. After a string of positive vaccine news, AstraZeneca yesterday admitted that it made a mistake in one of its trials. AstraZeneca Plc is likely to conduct an additional global trial to assess the efficacy of its COVID-19 vaccine. The company’s CEO said he did not expect the additional trial to hold up regulatory approvals in the UK and the European Union. Clearance from the US Food and Drug Administration may take longer because the regulator is unlikely to approve the vaccine on the basis of studies conducted elsewhere, especially given the questions about the results. For more details on vaccines and development in virus cases, see our latest COVID-19 update, 26 November.
EU budget dispute. Yesterday, the prime ministers of Hungary and Poland, Viktor Orban and Mateusz Morawiecki, showed no willingness to compromise in the dispute with the EU over a proposed rule-of-law condition in the new EU budget and recovery fund. After a joint meeting in Hungary, they called on ‘substantial changes’ to the conditionality. Meanwhile a senior EU diplomat saw no case for reopening the conditionality mechanism in the European parliament and European council. Germany, which is holding the rotating presidency, is trying to broker a compromise between the two sides ahead of the 10-11 December EU heads of state meeting. The tough stance by Hungary and Poland may weigh on their currencies in the coming sessions as investors may fear the two countries being cut off from EU funding.
Brexit negotiations. After key negotiators on the EU side had been quarantined over COVID-19 fears, they will restart negotiations today with briefing of EU countries and then likely travel to London to resume negotiations with the UK counterparts. Although both sides warn that negotiations are very difficult, we still believe that they will find a compromise, which should lend support to the GBP, but time is getting increasingly tight and the 10-11 December will be a crucial fix point.
Equities. European equities struggled for direction yesterday and with light trading volumes as US markets were closed for Thanksgiving. STOXX 600 closed down 0.1% (FTSE -0.4%, Dax unchanged and CAC 40 -0.1%). Growth and Defensives extended their gains, with Health Care and Technology among the winners. Value-intense sectors closed lower with Autos, Energy and Banks leading the declines. Similarly, Nordic markets saw mostly unchanged indices, but defensive Copenhagen the exception, up 0.6%. US futures point to a similar opening today, indicating small losses or unchanged US indices at best. Likewise, Asian equities see slightly lower markets this morning.
FI. European rates ended 1-2bp lower on a day with little news, where the day was mostly a gradual decline for core rates. Bund ASW widened 0.5bp. ECB minutes did not change sentiment and the US was out for Thanksgiving. Portugal 10y bond joined the ‘club’ of negative 10y rates with just touching negative territory briefly for the first time. Outstanding EGBs total almost EUR6trn. Traditionally, with US Thanksgiving holiday yesterday, activity in bond markets is likely subdued today.
FX. The Riksbank offered no further support to selling EUR/SEK in our view. We generally suggest selling EUR/USD on spikes into the mid-to-high 1.19-area while such appear driven amid no news on Brexit and the EU budget, nor strong equity momentum. In line with broader market sentiment NOK suffered a setback in yesterday’s session with EUR/NOK moving towards 10.60.
Credit Spreads took a small leg tighter yesterday where iTraxx Xover ended in 270bp (-1bp) and Main in 49bp (unchanged). Cash bonds saw tightening of around 3bp and 1bp for HY and IG, respectively.
