Market movers today
- Today’s focus continues to be on the spread of COVID-19 as well as the Brexit negotiations. Yesterday, UK sources warned that a collapse could happen within hours while UK’s Davis said that no trade talks would continue next year.
- In the stand-off between Poland/Hungary over the EU budget and recovery fund, EU officials yesterday set a deadline for today by which the two Eastern European countries should present a compromise proposal to the rest of the EU.
- Details of the USD908bn bipartisan proposal of a US fiscal stimulus package, which was released yesterday, will also be digested by markets today.
- Today German ZEW is released.
The 60 second overview
Politics. Markets are still waiting for a decisive breakthrough on both the issue of a post-Brexit trade deal and the standoff between EU and Poland and Hungary over the budget and recovery fund.
COVID-19. UK will be the first western country to start vaccinating people, when it rolls out its vaccine programme today. UK will offer the vaccine shot from Pfizer and BioNTech and elderly over the age of 80 will be first in line.
Equities. Monday’s markets closed mostly down, in an uneventful session. S&P 500 ended -0.2% lower, Nasdaq outperformed up 0.5%, Dow -0.5%, and Russel -0.1%. Value trailed Growth, with Energy under outsized pressure, along with Financials and Healthcare. Communications services and Tech outperformed with support from Facebook, Netflix and Apple. This setting is expected to linger into today, with US futures slightly lower. Also, Asian markets are muted this morning, with most markets down 0.5%-1%.
FI. European rates declined yesterday on renewed risks of COVID-19 spreading and the weaker US jobs report on Friday. After an initial drop of 2-3bp across the EGB space from the morning start, albeit slightly led by core rates, we observed mostly sideways trading through the rest of the day. Intra euro area spreads widening 1-2bp amid flatter curves. We expect more low volatility trading ahead of the ECB meeting on Thursday. Bund ASW widened 1bp.
FX. GBP was the big initial loser in yesterday’s session with EUR/GBP moving as high as 0.914 before settling back at 0.905 on improved Brexit negotiation news. EUR/USD headed lower while Scandies had a remarkable strong session given limited news and souring Brexit risk.
Credit. Credit markets showed the first tangible signs of weakness in more or less a month yesterday when iTraxx Xover widened to 243bp (+10bp) and Main to 47 (+2bp). Cash bonds were steadier, with HY widening around 2bp and IG more or less unchanged.
Nordic macro and markets
In Norway, Norges Bank will publish the Q4 Regional survey. Rising infections, tighter restrictions and weaker growth have probably pushed up uncertainty in the short term, but the positive news on vaccines may have helped reduce the risk of a deeper and/or more protracted downturn. Expectations ought to be stronger than in the previous survey in September in all sectors besides household services. Hence, there is reason to expect an increase in the aggregated output index for the next six months. Given the major variations between sectors, we will also be keeping an eye on the indicators for capacity utilisation and labour supply constraints.
