Wed, Jun 23, 2021 @ 11:23 GMT
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Tuning In On FOMC Minutes

Market movers today

  • The key focus is the FOMC minutes, where we tune in on the Fed’s take on its monetary policy stance amid highly expansionary fiscal policy and rising yields.
  • In the euro area, the final service PMI for March is released.
  • We expect the Polish central bank to keep its benchmark rate unchanged at its policy meeting, signaling a dovish stance amid sharply rising virus cases in the country.

The 60 second overview

Macro: Yesterday, the IMF released its World Economic Outlook, revising up slightly their global GDP growth forecast to 6.0 % (from 5.5 %) for 2021 and 4.4 % (from 4.2 %) for 2022. The stronger growth outlook mainly reflects faster recovery in advanced economies, and especially in the US, although we think the IMF are still too conservative on the outlook for the world’s largest economy. This is also the case for China (we expect 9.5% growth in 2021 vs the IMF’s 8.5%). Euro Area forecast was also revised slightly higher close to our forecasts of 4.4 % for 2021 and 4.1 % for 2022 (for more details, our latest global update see here (Big Picture, 23 March). IMF still highlights the risks related to the pandemic, namely new virus mutations and uneven distribution of vaccines across countries.

US fiscal policy: “We are going to be careful to learn the lessons of the (global) financial crisis, which is: ‘Don’t withdraw support too quickly,'” Yellen said to leaders of the IMF and the World Bank yesterday, underscoring that the Biden Administration had decided to “go big” with its COVID-19 response to avert the negative “scarring” impact of long-lasting unemployment.

COVID: Australia and New Zealand are taking the first steps towards a world with traveling again as they will create a quarantine and testing free “travel bubble” from 19 April. 40% of arrivals to New Zealand in 2019 were Australians, so this should bring a significant boost to the tourism sector in New Zealand.

Equities: Global equities slightly higher yesterday driven by Easter catch-up in Europe. Interestingly, the lift in Europe not driven by one particular sector but instead a very broad based move higher with 22 out of 24 industries higher. No big spilt on sectors either but simply a fairly uneventful session. US indices fluctuated around all-time high but ended marginally lower with Dow -0.3%, S&P 500 -0.1%, Nasdaq -0.1% and Russell 2000 -0.3%. Most Asian markets are high this morning but none of the big indices up more than 1%. European and US futures basically flat.

FI: European bond yields increased yesterday with the periphery underperforming core-EU as both Italy and Portugal are coming to market with deals in the long end of the curve. US Treasury yields declined modestly.

FX: In a fairly slow session SEK, CHF and EUR were among yesterday’s winners at the expense of the USD, GBP and CAD. EUR/USD moved above 1.1850 while EUR/SEK fell back to the low 10.20s. USD/JPY dipped below110 on US fixed income performance while EUR/NOK almost hit 10.10.

Credit: While CDS indices took a breather, cash bonds did well yesterday where HY bonds tightened 4bp and IG 1bp on average. iTraxx Xover widened ½bp (to 245bp) and Main was marginally wider (ending in 50½bp).

Nordic macro and markets

We have just published our updated macro outlook for the Nordic economies. We are on the threshold of a strong recovery as the Nordic economies open up, and we have mostly updated the outlook since January, as global and domestic outcomes have surprised to the upside. The exception is Norway, where new lockdowns have delayed the recovery. The Nordics are performing very well compared to the rest of Europe.

Danske Bank
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