Wed, Feb 08, 2023 @ 16:20 GMT
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Positive Vaccine News Keep Ticking In

Market movers today

  • Another day with mostly tier-2 data releases. In Sweden, the NIER survey is due out.
  • In the US we get weekly jobless claims data and core capex data for January. A lot of FOMC members are also speaking tonight but they are unlikely to say anything new – the Fed will remain very patient removing accommodation.
  • In EU, monthly confidence indicators across countries are due out. We also have a few ECB speeches today including from ECB Vice President Guindos.

The 60 second overview

Positive vaccine news – please keep them coming! US FDA released its report on Johnson & Johnson ahead of tomorrow’s advisory board meeting. The report finds that the single-shot vaccine is “safe and effective”. Very interestingly the Johnson & Johnson vaccine has been tested also in Brazil and South Africa where other strains are dominating and yet it remained effective. We expect the vaccine to get approval on Saturday. Moderna also released a press statement saying that it will begin phase 1 clinical trials for its vaccine targeting the South African variant. Moderna says it may be ready for delivery in Q3. US FDA has already issued guidance saying that updated vaccines should not go through as many trials as the original ones and producers only need to show that the update works (EU EMA still has not issued any guidance on vaccine updates yet, at least not to our best knowledge). Just remember that, according to research, the original Moderna vaccine is still effective against new strains so the updated vaccine may not be necessary at all. Also Moderna is increasing its production target to at least 700 million doses (potentially up to 1 billion) this year. A big study including 1.2 million people in Israel shows the Pfizer vaccine is extremely effective in line with clinical trial data.Overall, vaccine news continues to be positive supporting our view that we can put the pandemic behind us this year.

Positive risk sentiment: The consensus story remains that things are looking brighter still with accommodative monetary policy, more fiscal support on its way in the US, a gradual reopening of most economies on its way as its get warmer with falling COVID-19 cases and still positive vaccine news. Equities are moving higher with values outperforming growth at the moment, yield curves are steepening and currencies like CHF and JPY are weakening and currencies like GBP and NOK are performing.

RNBZ to take housing into account: Yesterday, it was announced that the Reserve Bank of New Zealand (RNBZ) should take the impact on housing into monetary and financial policy decisions.

UK is set to increase corporate taxes: Financial Times reports that the UK Chancellor Rishi Sunak will announce a corporate tax hike in next week’s budget to fill the gap caused by the pandemic. Sunak will argue that it is okay, as the UK’s corporate tax rate is the lowest in G7 at 19%.

Equities: Equities ended mostly higher yesterday in a very volatile trading day where development in bond yields continued to dominate risk appetite and sector rotation. Cyclicals outperformed defensives and value made its 8th consecutive day outperforming growth. The massive underperformance in Asia yesterday is reversing today led by South Korea where the Kospi index is 3.5% higher this morning. European and US futures in green this morning.

FI: In yesterday’s trading session global yields came under pressure with spread widening to periphery in the Euro area amid steeper curves. Yet again it was the long-end of the US rates that drove yields higher where from the US open the 30y Treasuries were up 9bp, albeit it fell slightly back to currently stand at 1.40%. Bunds sold off roughly 1bp over the day to currently stand at -0.304%, after touching -0.275% in the early afternoon. We see further widening pressure to the US-German 10y spread from current 170bp, albeit it has already widened almost 10bp this month.

FX: Classical FX havens are weakening (CHF, JPY) and risk currencies such as GBP and NOK are performing well as US rates are now rising in tandem with equities & commodities.

Credit: Though CDS indices followed European equities in green, with Xover ending in 252bp (-3bp) and Main in 48½ (-1bp), cash bonds were somewhat less in demand. HY widened around 2bp and IG ended unchanged.

Nordic macro and markets

In Sweden in the NIER survey due out today, we will mainly be focusing on whether the current divergence between on the one hand the manufacturing sector and business-related services, and on the other consumer-related services and retail trade. The index components of the former have rebounded and might continue to remain elevated, whereas the latter are likely to keep suffering on the back of a slight tightening of restrictions since the last survey. The January print of the aggregate ETI came in at 100, i.e. back at “normal” levels, although this is definitely not the case for all sectors, as outlined above.

 

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