Market movers today
- There are no significant market movers today, so COVID-19 developments and restrictions together with Brexit negotiations are in focus.
- On Brexit, UK foreign secretary Dominic Raab said yesterday that a deal could potentially be made this week after good faith negotiations last week between the EU and the UK. Look for further signals from the two sides today as the fishing issue appears to be the last remaining sticky point.
- OPEC and OPEC+ meet today and tomorrow meets for their regular semi-annual meeting. Oil producers are set to discuss whether to delay the planned 1.9mb/d output hike.
- Overnight we get the private version of the Chinese PMIs, which should show a decent print after the official ones came out stronger than expected this morning.
- In focus later this week will be the US ISM survey tomorrow, German and euro area retail sales (Wednesday and Thursday, respectively) and non-farm payroll on Friday.
The 60 second overview
COVID-19. While Europe continued to see improvements over the past days, some of the bigger US states like California are struggling to contain the virus. Over the weekend, San Francisco followed Los Angeles in imposing tighter restrictions, targeting inter alia restaurants, gyms and movie theatres. These restrictions may hit service sector activity, which so far has held up better than Europe.
Global macro. The Chinese economy continued on a strong note in November. This morning both manufacturing and service PMIs beat consensus and edged up from October with the composite remaining at expansionary levels at 55.7. The Chinese economy may face some headwinds from the cautious tightening of monetary conditions by the Chinese authorities and softer demand from key export markets in Europe and the US due to new coronavirus restrictions there.
OPEC meeting. Key OPEC+ members over the weekend held preliminary talks over whether or not to delay a planned 1.9mb/d output hike. Hence, talks will continue today and tomorrow when OPEC and OPEC+ meet. The outlook for oil demand has improved following a string of positive vaccine news, but short-term new waves of restrictions are holding back a recovery in consumption. In our view OPEC+ is set to end up deciding on some form of symbolic delay of output hikes, which would be marginally positive for the oil price. We will probably have to wait until Tuesday before a decision is final.
Equities rose Friday in a quiet session where growth stocks again outperformed value and defensives fared better than cyclicals not least in Europe. More indices like S&P500 and Nasdaq are setting new all-time highs. This morning Asian markets are mostly lower despite very strong PMI prints from China. Both European and US futures are trading slightly lower.
FI. 10Y German and 10Y US Treasuries were again caught in a very tight trading range last week. The 10Y German yield has been trading with 0.55bp to -0.59bp, as the European economy is struggling with lockdowns on the back of rising infections. Hence, the positive news we had a few weeks ago on the possible vaccine has yet to materialise in the global rates.
FX. OPEC+ meets to decide whether to delay a planned hike of oil output. We could be in for a couple of volatile days in the oil market, where NOK and JPY stand out as the most exposed currencies in G10.
Credit. Decent albeit muted performance on Friday when iTraxx Xover tightened to 267bp (-3bp) and Main to 49 (unchanged). IG cash bonds were more or less unchanged, while HY saw tightening of around 3bp. Primary market activity has been subdued due to Thanksgiving, but should pick up again this week.
Nordic macro and markets
We look at the current economic situation in the Nordic countries in light of the rising number of infections and new restrictions in these countries over the past couple of months.
This morning we published Green Research: Climate and Financial Markets – What we will look out for in 2021. We take a look at 2021 and focus on the green agenda and the issues that we expect to dominate in the Nordic countries and the EU seen from a financial point of view