Market movers today
- Today is a quiet day in terms of data releases. In Sweden, the Debt Office borrowing forecast is due out today.
- In the UK, we will listen closely to Bank of England policymakers with governor Bailey, Broadbent, Vlieghe, Haskel and Haldane all speaking.
- In the US; we will once more hear from Fed Chair Powell when he testifies before the House Financial Services Panel. We also hear from Clarida and Brainard.
The 60 second overview
Powell: Fed chair Powell repeated that the Fed will remain patient and that the central bank will not roll back its accommodative monetary policy prematurely. The patient tone supported “the reflation trade” and risk sentiment in the late hours of the US trading session sending S&P500 back in positive territory and US 10yr breakeven inflation higher. The question is whether investors are having second thoughts with Asian equity indices in the red this morning although this is probably driven more by a heavy sell-off in China led by Hang Seng after report telling Hong Kong Exchanges raising stamp duty on stock trading.
AstraZeneca delivery problems?: Reuters wrote yesterday that AstraZeneca is not going to meet its EU delivery target in Q2 either. However, it seems like the story is old news and that many countries have already have taken this into account in their projections. Süddeutsche Zeitung wrote on 1 February that Germany expects to receive 16.9 million doses, which corresponds more or less to Germany’s share of the delivery to the EU of 90 million doses in Q2, according to the Reuters story. Also Irish Prime Minister Micheál Martin said it was already pencilled in. AstraZeneca rejects that it is written in stone that the delivery will be 90 million doses and “still works hard to deliver 180 million doses to the EU in Q2”, according to Danmarks Radio (Danish national broadcaster, article in Danish).
Equities: Volatile day in equities yesterday with a continuation of the rotation we have seen the last week despite moves in yields fading yesterday. US equities closed mixed but ended near best levels as stocks rebounding through the afternoon. S&P500 broke a five-day losing streak, while Nasdaq 100 down for sixth consecutive session and value outperformed growth for the seventh consecutive session. Dow +0.1%, S&P 500 +.1%, Nasdaq -0.5%, Russell 2000 -0.9%. Asian equities weaker this morning with a heavy sell-off in China led by Hang Seng after report telling Hong Kong Exchanges raising stamp duty on stock trading. Futures in Europe and US breaking lower after trading in green earlier this morning.
FI: It has again been a volatile day in the financial markets with 10Y yields in Germany rising by some 4bp and the curves continue to steepen from the long end. The US treasury curve also steepened between 2Y and 10Y, but this was a bullish steepening from front end on the back of the comments from Fed Chairman Powell.
FX: Like risk in general, NOK marked a strong comeback late in yesterday’s session as Powell’s remarks sparked renewed performance in reflation sensitive assets. This rhymes well with the case pencilled out in recent days that central bank communication was likely to halt the move higher in real rates which by extension was set to benefit NOK.
Credit: Though cash bonds overall fared better yesterday than on Monday, CDS continued their widening. iTraxx Xover widened to 255bp (+5bp) and Main to 49–1/2bp (+1bp). Both HY and IG widened around 1bp.
Nordic macro and markets
In Sweden, the Debt Office borrowing forecast is out today and at the current juncture, it is extremely uncertain what the Debt Office will come up with regarding new budget projections. The Macro forecasts from October do not stand out much compared with other forecasters, however unemployment does not seem do reach as high as the Debt Office feared then (10.7% in 2021). What we know as a fact though is that actual monthly budget numbers since the October forecast (months of October-January) have been consistently better than expected. In the early phase of the pandemic the government flagged for an extensive kick-start of the economy once the pandemic is over (105bn in stimulus in 2021). Still, the development to-date suggests that the Debt Office will present a lower 2021 deficit, guestimate is a deficit in the range SEK 20-40bn and a budget in proximity of balance in 2022. Notice though, this is to a large extent a matter of guessing.