Sat, May 08, 2021 @ 15:47 GMT
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More Vaccine Challenges For EU

Market movers today

  • News on the Johnson & Johnson (J&J) vaccine will remain in focus, see below. An emergency meeting of the CDC’s outside advisory committee is scheduled for today.
  • It’s also time for Swedish inflation for March, see more below.
  • In the US, several FOMC members are speaking and we will in particular listen to Fed chair Powell, Fed Vice Chair Clarida and NY Fed President Williams. Especially, Fed Vice Chair Clarida’s speech seems interesting, as he is focusing on the Fed’s new monetary policy framework. Clarida is not only one of the most influential FOMC members, he is also one of the most intellectual, so we usually get a better understanding of the Fed’s reaction function by listening to him.

The 60 second overview

US suspension of the J&J vaccine manageable: Yesterday, the US suspended the administration of the J&J vaccines due to six reported US cases of a rare and severe type of blood clot in individuals after receiving the J&J vaccine (out of more than 6.8 million injections) – the same events that suspended AstraZeneca in several EU countries recently. This has been a concern, as the AstraZeneca and J&J vaccines are based on the same technology. The pause is expected to be short (“a matter of days”) in order to give the health care systems some time to prepare for the possibility of more future cases. We are not overly concerned about the US vaccine roll-out, as the J&J vaccine accounts for less than 4% of the total number of administered doses. The US is more heavily relying on Pfizer and Moderna vaccines.

More challenging for EU: The J&J news is more problematic from an EU perspective, where the vaccine roll-out is slower and where countries have already had to deal with the AstraZeneca vaccine. One thing is whether the vaccine is approved, another is whether people are willing to get vaccinated with a specific vaccine type. J&J has suspended EU deliveries until further notice, which came as a big surprise to the EU Commission. Without the J&J vaccine it will be much more difficult for the EU to reach its target that 70% of the adult population is vaccinated by summer.

Moderna delivers better vaccine news: Yesterday evening, Moderna issued a press release stating that the Moderna vaccine is 90% effective after six months (95% against severe cases). This is good news, as one of the key unknowns is how long-lasting protection is. Moderna also said that new preclinical data for its booster vaccine candidates (targeting the South African variant B.1.351) have shown good results. It is very positive that we likely soon will have a booster vaccine, just in case. This means that one key downside risk is diminishing.

US CPI inflation higher than expected: Headline CPI for March came out at 2.6% y/y (consensus 2.5%, previous 1.7%) while core moved up to 1.6% y/y from 1.3% y/y. The rise in the core measure was driven by service prices likely related to the reopening of the economy. However, the Fed has stated they see the short-term rise in inflation as transitory due to base effects from energy prices and one-off increases in service prices related to COVID-19.

Equities: Tuesday saw a slightly higher session for equities with Asia leading the market. It sure did not feel like it, but S&P500 narrowly set a new high, rising 0.3%. Mixed movements in Asia this morning but China is extending its’ gains. US futures are indicating an unchanged opening.

FI: US Treasury yields declined despite the solid US CPI numbers for March, suggesting that bond investors are already positioned for higher inflation. Even though the CPI data was higher than expected it is not high enough to change the ongoing economic monetary stimulus. Furthermore, there was solid demand at the 30Y US Treasury auction. Finally, the Johnson and Johnson vaccine being put on hold in US and Europe also supported bonds.

FX: USD weakened yesterday driven partly by risk-on in equities and EUR/USD ended the day around 1.1950. EUR/GBP followed EUR/USD higher trading slightly below 0.87. After a brief visit above 10.20, EUR/SEK has reversed some gains and is approximately back to where the week started. Neighbouring NOK had a roller-coaster ride yesterday but NOK ended the session as one of the clear losers.

Credit: Credit spreads edged slightly wider yesterday with iTraxx Xover closing in 250bp (+1bp) and Main in 51bp (unchanged). HY bonds widened 3bp and IG ½bp.

Nordic macro and markets

In Sweden, we expect March CPIF and CPIF excl. energy to print 1.7 % y/y and 1.3% y/y respectively, broadly in line with consensus but 0.1 and 0.2 percentage points below Riksbank’s forecasts. We expect March CPIF to rise a seasonally normal 0.2 % m/m. That increase is fully offset by a drop in energy of the same magnitude. Needless to say, there are several uncertainties: 1) is there any lagged impact from stronger krona?, 2) has container traffic/semi’s disturbance had any impact on prices? and 3) how much of the basket will be imputed? Looking forward, we still expect the peak in inflation to come in April as base effects fade.


Danske Bank
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