Market movers today
- This week starts out fairly quietly on the data release front, so focus will be on the approval of the US fiscal stimulus bill, which needs to be passed in the House of Representatives after Senate approved it over the weekend. The vote is expected on Tuesday.
- German industrial production data for January are due out today, which is likely to have declined compared with December.
- Overnight, Chinese money supply numbers for February are likely to shed light on the degree of monetary tightening taking place in China.
- Later in the week, the ECB meeting is of course the key event, see more in our ECB Preview Talking or acting?.
- Neither the ECB nor the Fed can intervene in markets due to silent periods ahead of the ECB meeting on Thursday and the Fed meeting on Wednesday next week amid rising real yields.
The 60 second overview
President Biden’s relief package: The US Senate approved Biden’s relief package (USD1,900bn or 9% of GDP), which is now sent back to the House due to some changes (among others the additional unemployment benefits are set to remain unchanged at USD300 per week instead of increasing to USD400 and fewer will get the third stimulus package). The House is expected to vote on and approve the package on Tuesday. The package will support the economy near-term and make the recovery stronger later in the year.
Oil jumps above 70: Brent oil jumped above USD70/barrel after an unsuccessful attack on Saudi Arabia’s export terminal Ras Tanura. Iran-backed Houthi rebels in Yemen have claimed responsibility.
US-EU tariffs suspended: The new Biden administration and the EU have decided to suspend all tariffs related to the Airbus-Boeing dispute (just like the US and the UK have done) for four months so there is enough time to negotiate. This is not a major market mover in itself but still a signal that the Biden administration wants a closer relationship with its allies.
Equities: Another volatile trading day in equities Friday and once again the turmoil in bond market directing the preferences for equities. Value outperformed growth by close to one percent and 4% in total last week. Energy sector stood out again as the best performer and rose 8% last week. Big difference in Europe and US as risk sentiment turned around late Friday, sending US stocks sharply higher – they were trading in red early in the session. Dow +1.9%, S&P 500 +1.9%, Nasdaq +1.6%, Russell 2000 +2.1%. Asian equities are mostly lower this morning but again in a volatile session. European futures are higher this morning while S&P 500 and Nasdaq futures have given up initial gains.
FI: It was a relatively calm trading session on Friday in rates space. 10y Germany rose 1bp amid trading in a tight range throughout the day. Intra euro area spreads vs. bunds traded in a similar tight range, with a tendency of a marginal widening. As both the ECB and the Fed have entered the silent period ahead of its respective policy meetings on Thursday and next Wednesday, we will not get further guidance about the monetary policy setting. The comments from ECB GC members and FOMC members do not suggest a general and imminent worry about the rise in yields.
FX: The big story of last week in FX markets was the rebound in broad USD with EUR/USD firmly moving below 1.20. Also, oil currencies ended last week higher amid the short-end of the oil curve bouncing on OPEC+’s surprise output hold. EUR/NOK moved below 10.20 and with a range trading EUR/SEK that temporarily sent NOK/SEK to parity. EUR/GBP moved back to the low 0.86s.
Credit: Credit markets had a rough session on Friday where iTraxx Xover widened to 257bp (+7bp) and Main to 50bp (+2bp). HY widened 5bp while IG was unchanged.
Nordic macro and markets
Riksbank buys T-bills today and continues with the whole palette of munis, covereds and govies later in the week. The Debt Office issues bonds on Wednesday. On Thursday a triplet of January data will be released giving a first glimpse on Q1 GDP growth.
