Market movers today
- March flash PMIs are released today for the euro area, UK, and the US and will give a glimpse of how the global economy has fared at the end of Q1. European data will likely continue to portray a picture of a two-speed economy with manufacturing in the lead and decelerating services activity, while US PMIs will probably remain elevated. US durable goods orders for February are also on the agenda.
- German Finance Minister Scholz will present a draft 2022 spending plan and it is rumoured that he will also propose suspending the debt brake for a third year in row.
- Note that on Friday March 26 at 13.00 CET we will host a webinar where we discuss the outlook for FX, equity, credit and bond markets in light of the spike in US yields.
The 60 second overview
Fed & vaccines: US Treasury yields retreated for a second day after a two-year auction saw solid demand and Fed chair Powell continued to downplay the risk of inflation during his appearance at the House committee. While the US recovery is on track, the slow vaccine roll-out continues to hamper the growth prospects in Europe. In response to its recent vaccine supply spat with the UK, the European Commission will today unveil tougher export rules for vaccines produced in the EU, that could lead to increased supply disruptions for the rest of the world.
Equities: Equites fell yesterday with the majority of the decline happening in the last hours of the US trading session. Massive rotation taking place again as defensives outperformed cyclicals, reopening plays under scrutiny while stay-at-home stocks outperforming and small caps in a big move lower. Lower bond yields and some concerns on vaccines and infections the main drivers behind the moves. This morning we see renewed pressure on Asian equities and once again, major autos are down amid concerns about chip shortages. European futures are lower while US futures are mostly flat with tech/growth stocks outperforming.
FI: Global bond yields continue to decline and the curves flatten from the long end of the curve. 10Y US Treasuries declined some 7bp yesterday as both Fed Chairman Powell and US Treasury secretary Yellen downplayed the risk of inflation. Furthermore, there was solid demand at the 2Y Treasury bond auction yesterday. In Europe, yields also fell and the 5Y German government bond yield is now close to -70bp. The Bund ASW-spread widened 1bp to 37bp. Hence, the increase in the QE is supportive for both spreads and outright levels.
FX: The combination of a rising USD, risk-off and lower commodity prices has weighed on NOK with EUR/NOK now back in the 10.20s. Broad dollar is strengthening and with it, we continue to see EUR/USD drifting lower (we forecast 1.15 in 12M).
Credit: While HY bonds remained under pressure yesterday, widening 2bp, IG bonds were unchanged. CDS indices saw only minor moves, with Xover closing in 271bp (marginally tighter) and Main in 54bp (-½bp).
Nordic macro and markets
DO issues SEK 1.5bn SGB1059 (2026) and SEK 3.5bn SGB1062 (2031). Riksbank publishes report Account of Monetary Policy in 2020 at 09.30 CET.
