Market movers today
- Tonight, focus is on the FOMC meeting. However, we do not expect any major policy changes tonight after the Fed changed its QE forward guidance at the December meeting. We expect Fed chair Powell will be asked about the tapering process on the back of the previous weeks’ discussions 13 January. In ECB, Villeroy and Lane is speaking.
- In Sweden we get the monthly Prospera inflation expectations, which is the last before the February Riksbank meeting.
The 60 second overview
Global macro: The IMF revised up its forecast for the global economy in 2021 by 0.3pp to 5.5%. Notably the US saw a strong revision by 2pp to 5.1% in 2021, due to stronger than expected macro-momentum in H2 2020 and the fiscal stimulus package approved before Christmas. However as IMF does not factor in the possible new package of USD1700bn which is being discussed, there may be upside to IMF’s forecast and our forecast of 3.3%. In the Euro area, the 2021 growth forecast was revised down by 1pp to 4.1%, slightly lower than our 4.9% as Germany, Italy and France are all expected to see a weaker rebound than expected. China is expected to grow at 8.1% in 2021 (basically unchanged), somewhat more cautious than our forecast of 9.1%. IMF expects inflation pressures to remain muted in advanced economies in 2021-22.
Vaccines: Monday’s Handelsblatt story reporting 8% efficiency of the AstraZeneca vaccine on the +65y age group was dismissed by the German health authorities and the EMA, as the 8% simply refers to a sample share and not the efficiency.
ECB: According to Bloomberg, ECB is said to discuss the euro appreciation and whether this is due to differences in stimuli policies.
Equities: Another day with desynchronized performance in equities. European stocks were broadly higher while Asian stocks were a massive underperformer. Cyclicals outperformed defensives and value outperformed growth, thereby breaking the seven-day streak of growth outperformance. The directionless markets continuing this morning in Asian while European and US futures showing only smaller changes. Tech heavy Nasdaq future slightly higher as tech reporting is off to a very strong start.
FI: The positive risk sentiment in markets sent EGB yields higher, with the exception of Italy which rallied after the recent underperformance in the latter part of last week. Spreads to core/ semi-core countries ended the day within a tight 0.5bp range from Monday’s close. BTPs-Bund spreads tightened 4.6bp yesterday and have since Friday’s close performed 9bp.
FX: As anticipated, it has been a rather quiet start of the week for EUR/SEK which is still trading firmly within the 10.05-10.15 range with relatively modest intraday-movements. In lack of any triggers, we believe said range will be applicable in the coming weeks as well. ECB is turning more focus to why EUR/USD appears elevated when European macro is so weak.
Credit: While equities rebounded strongly from Monday’s sell-off, credit market movements were more subdued. Though iTraxx Xover tightened to 260bp (-3bp) and Main to 50bp (-1bp), cash bonds still had some catching up with CDS indices to do, leading HY to widen 3bp while IG widened 1bp.
Nordic macro and markets
In Sweden, Prospera releases a new inflation survey. This is the monthly version covering money market players so it is of somewhat less weight for the Riksbank compared with the broader quarterly version. Still it is the last one to be published before the upcoming February 10 Riksbank announcement. Inflation is off the spring lows which suggest some stabilisation of inflation expectations.
