HomeContributorsFundamental AnalysisBiden Warns US Senators On China

Biden Warns US Senators On China

Market movers today

  • December GDP from the UK is likely to show an increase, as the UK re-opened in December after being locked down in November. However, right now the UK is again in the middle of a lockdown with subdued economic activity.
  • Norway releases Q4 GDP, see comment below.

The 60 second overview

Equities: Stocks were slightly higher yesterday with one industry standing out; semiconductors and semiconductor equipment rose 3% as US administration said they are working to address the global semiconductor shortage. In Asia the few markets open for trading are mostly lower. China, South Korea, and Singapore are off for Lunar New Year celebrations. US and European futures are slightly lower this morning.

US-China relations: US President Biden spoke to US senators yesterday after a two-hour call with Chinese President Xi on Wednesday and warned that “If we don’t get moving, they are going to eat our lunch”. “They’re investing billions of dollars dealing with a whole range of issues that relate to transportation, the environment and a whole range of other things. We just have to step up”. It highlights Biden’s stronger focus on investing in the US to keep the country ahead in the future compared to Trump’s approach of holding China back through export bans on technology.

Vaccines and COVID-19: The situation continues to improve in the US and in most of Europe. The good news is that data from the UK and Israel, two of the leading countries in the vaccination race, show that the vaccines are definitely working. We have also received some good news on treatments.

Macro: US initial jobless claims was a bit higher than expected yesterday at 793k (consensus 760k) confirming that employment is struggling from the COVID restrictions. The job situation should improve significantly, though, once vaccines have been rolled out and restrictions fully lifted.

FI: Bunds continued to rally on the back of the lower than expected US inflation data Wednesday and a dovish outlook for the Federal Reserve. Furthermore, the 10Y spread between Italy and Germany continues to tighten and is close to breaking through the 90b-level on the expectations for Draghi to become the next Italian prime minister.
We expect our -40bp to-60bp range to hold for Bunds for now. There is still a significant stimulus coming from global central banks including ECB and the Federal Reserve. If we are to hedge the outright exposure we prefer to buy linkers rather than e.g. pay in swaps.

FX: It has so far been an unusually quiet week in FX markets with most currency pairs range trading. EUR/USD remains just above 1.21, GBP momentum has eased while both SEK and NOK have respected recent trading ranges.

Credit: Decent performance in credit markets yesterday, with iTraxx Xover tightening to 240bp (-3bp) and Main to 47bp (-½bp). Cash bonds also did well with HY tightening around 1bp while IG was only marginally tighter.

Nordic macro and markets

Norway releases Q4 GDP today. The numbers will of course be slightly less important than otherwise as a result of the new coronavirus restrictions in January impacting negatively on growth at the beginning of 2021, and the severity and duration of the downturn still being unknown. That said, the figures will confirm that the negative impact on the economy of the second wave of infection in October/November was much smaller than that of the first wave in the spring, which may help allay fears about growth in Q1 this year. We actually expect mainland GDP to climb 1.4% q/q in Q4 (consensus 1.3% q/q), giving negative growth of 3.3% for 2020 as a whole.

 

Danske Bank
Danske Bankhttp://www.danskebank.com/danskeresearch
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