Market movers today
- German inflation is released, giving early signs of tomorrow’s euro area inflation print.
- Overnight, the official Chinese PMI manufacuting and service PMIs for March are released. We expect an increase – mainly as a temporary correction after a big drop in the past three months. Metal prices have held up well and other activity indicators point to a less sharp drop than PMI currently indicates.
The 60 second overview
News from President Joe Biden: Yesterday, President Joe Biden warned US states against opening up too quickly amid vaccinations with new cases flaring up in multiple states. On a more positive note, Biden said that 90% of Americans will be eligible to get a COVID-19 vaccine by 19 April and the vaccination pace continues to increase. This supports our call that the US will end the pandemic before the EU, which is a key reason why we are more upbeat on the US macro outlook than the euro area outlook (the relief package is another). White House spokeswoman Jen Psaki said that President Biden has a plan to pay for his USD3,000bn infrastructure package which will be outlined tomorrow alongside the spending elements. The infrastructure package will have to get over the finishing line supported by Democrats only (we do not expect Republican support) and the question is how united the Democratic Party is on tax hikes, which will be an important theme to follow over the coming months.
The dollar: Unlike last year, we are seeing dollar strength versus DKK, EUR, SEK and likely NOK soon too. The drivers appear to be a combination of the Chinese credit tightening (as Europe have benefitted from Asian export orders) as well as rising US real interest rates (and declining European). The repricing is likely amplified by the dollar being generally weak and thus leaving scope for a turnaround. For EUR/USD, we target 1.15 in 12M and see some downside risk to this.
Equities: Despite some worries on forced liquidations emerging markets closed off days’ lows. In contrast to the short squeeze frenzy a couple of months ago this did not lead to a full blown risk off-session, but the volatility stayed very isolated. Defensives outperformed cyclicals though, and small caps were once again a major underperformer.
US equities finished mixed, with Dow +0.3%, S&P 500 -0.1%, Nasdaq -0.6% and Russell 2000 -2.8%. Banks continued to sell off and the swift unwinding of Archego’s holdings also caused a continued drop in media stocks. Utilities, consumer staples, communication services and healthcare outperformed. Asian markets are posting solid gains this morning and US futures indicate a slightly positive opening with value rebounding.
FI: The US 10yr yield has risen back to near-highs, just shy of 1.75%. This follows a consolidating last week, where many have been looking for a more sideways moves in yields.
FX: NOK continues to rise with EUR/NOK touching the 11 March low yesterday at 10.04. In the other end of the scale, SEK was the worst performing G10 currency yesterday. Light Easter trading before quarter-end in Scandies, so we do not want to make too much of either move.
Credit: Credit only saw minor moves yesterday. iTraxx Xover and Main both widened ½bp to 264bp and 54bp, respectively. HY bonds tightened around ½bp while IG widened ½bp.
Nordic macro and markets
The Swedish National Institute of Economic Research (NIER) releases the March business- and consumer confidence survey. For manufacturing it is of interest to investigate signs of supply shortages (semiconductors for instance) and if this is beginning to affect activity negatively. For the retail sector signs of higher price plans are of interest though so far such signs have been broadly absent. The NIER also releases a new Swedish macro forecast.