Market movers today
- Today, we get the February jobs report from the US. We expect positive employment growth but not a significant rebound so overall employment will remain subdued.
- In China, the annual National People’s Congress kicks off today. Here they announce goals for 2021 as well as the new Five-Year Plan for 2021-2025.
- In Denmark, February bankruptcies will be interesting to see, after a spike last month. We expect a decline back to lower levels.
- Today brings Swedish national debt office’s monthly update regarding the Swedish budget balance (see more in the Nordics section).
The 60 second overview
Fed chair Jerome Powell did not stop US (real) rates from increasing: Powell spoke yesterday, which was the last time before the Fed’s blackout period. Powell said he has taken notice of the increasing rates but did not do much to stop yields from rising. US 10yr Treasury yields rose 5bp to above 1.5% yesterday driven solely by higher real rates. EUR/USD moved below 1.20 and NASDAQ took another big hit erasing all gains this year and is now nearly 10% down from its peak. Both the Fed and the ECB have limited options to stop rising yields ahead of the March meetings, as the Fed enters the blackout period on Saturday and the ECB already is silent, which may cause some volatility. Yesterday, we published our ECB preview ahead of next week’s ECB meeting, see ECB Preview: Talking or action?.
Oil and OPEC+: Surprisingly, OPEC+ decided to keep output unchanged in April, which led to a sha rp rise in oil prices with Brent oil now trading at USD67/barrel. We doubt the potential for oil prices to rally much higher in the short-term. OPEC+ is set to meet again on 31 March and 1 April. Should oil prices rise further the rest of the month, we are likely to see OPEC+ raise production.
COVID-19: The picture in Europe has not changed much since last week. New cases grind higher in many countries but nothing alarming in most places. We have for some time highlighted that a key risk this year is whether vaccines are effective against mutations or not. While most research find that they still are (although neutralisation titers may be lower), we also think it is important to remember that T-cells may still limit the chance of severe cases. Overall, we think most news continue to support that the advanced economies will put the pandemic behind them this year.
China GDP growth target: China’s new growth target is “above 6%”, well below consensus expectations. The new target seems more flexible, perhaps given the still high uncertainties due to the pandemic.
Equities: A slow day in Europe, but a clear sell-off in the US session summarises Thursday´s markets. As Powell failed to alleviate fears or rising yields, rising risk aversion took over and transformed it to another full blow risk-off session. Nasdaq dropped -2.1% which takes the index inches away from correction since the peak in February. Small caps also underperforming with Russell 2000 -2.8%. S&P closed down -1.3%, and Dow -1.1%. Sector wise, defensives were managing the best with Energy and Utilities higher. Growth names the worst hit, with IT and Consumer Discretionary down over -2%. US development feeding into the Asian this morning with equities mostly lower and US futures point to another opening in red.
FI: US Treasury yields rose significantly and the curve steepened, as Federal Reserve Chairman Powell was unable to convince markets that the monetary policy is going to stay very accommodative at an online event yesterday evening.
FX: Overview: EUR/USD fell below 1.20 as Federal Reserve Chairman Powell failed to calm the market. EUR/NOK ended the day unchanged after a late setback in global risk sentiment erased the positive impact from the rise in oil prices following the OPEC+ decision to keep oil output unchanged.
Credit: Neither CDS indices nor cash bonds really moved yesterday. iTraxx Xover was unchanged at 251bp and Main at 48½bp. HY and IG were both unchanged to marginally tighter.
Nordic macro and markets
Today brings Swedish national debt office’s monthly update regarding the Swedish budget balance. SNDO’s own forecast is for a surplus of SEK 53.1bn for the month of February. Since October, the budget balance has been SEK 54bn stronger than previously estimated. The new forecast (from February 24) is for a deficit totalling SEK 63bn throughout 2021 (to be compared with a deficit of SEK 221bn for 2020 and the previous estimate of SEK 80bn for 2021).
