Tue, May 18, 2021 @ 11:08 GMT
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German Politics And Stand-Off With Russia In Focus While Waiting For ECB

Market movers today

  • Today: A quiet start to the week in terms of economic data, no key releases are scheduled for today. There won’t be speeches from ECB or Fed either, as both central banks have entered blackout periods ahead of upcoming meetings.
  • During the week: Later in the week, the focus will be on the ECB meeting on Thursday, although no major changes are expected. Finally, markets will focus on April Flash PMIs for both Euro Area and the US on Friday.

The 60 second overview

Germany: A lot of focus on who will follow Merkel and lead the Conservative block into the September election. The Bavarien State Premier Markus Soeder and head of the CDU sister party CSU will come to Berlin today to promote his one-week old official bid to lead the Conservative bloc. Soeder has tried to convince the CDU that he will be a better leader than Armin Laschet that was elected CDU leader just three months ago. A decision could come today or tomorrow.

Russia: During the weekend the US administration warned Russia of consequences if the opposition leader Alexey Navalny dies. Navalny was imprisoned last month after he returned to Russia. Navalny began a hunger strike on March 31 demanding proper medical care from outside the prison system. The Navalny case comes on top of the Russian recent decision to build up troops on Ukraine’s border. USD/RUB has been stable overnight.

Housing US: We saw some very strong March US housing data on Friday, where US housing starts rose to the highest level since 2006. Residential starts rose 19.4% or 1.75mn in annualized rate. Due to harsh weather, February’s numbers were weak. But even taking that into account the numbers point to a still-strong housing market in the US. The number of applications to build increased 2.7%. It points to future strength in US housing construction. Same picture is seen in the UK. Rightmove said this morning that UK house prices rose 2.1% m/m in April.

Cryptocurrencies: We have seen some wild swings in cryptocurrencies that trade 24/7 over the weekend. Bitcoin fell as much as 15% but are recovering some of the losses this morning. The move comes after record high prices in the run up to the direct listing of Crypto trading platform Coinbase on Wednesday. Apparently, market participants were fearing a US crackdown on money laundering carried out through digital assets.

Equities: Equities continued higher Friday with another set of record closing levels. Banks and value stocks were back in favour as the earnings season in the US is off to a very strong start. This week is starting out on a solid note in Asia with most countries in green. India struggling with very high Covid-19 infections is a big underperformer today. Small gains in European futures while US futures are flat.

FI: The main event this week will be the ECB meeting on Thursday. We expect that the focus will be on the economic recovery and PEPP programme. The market reaction is expected to be fairly muted see more in our ECB preview from Friday April 16.

There is plenty of supply this week from regular auctions in Finland, Germany, France and Spain. Finland is tapping in the RFGB 0.25% 2040 for up to 1bn. On top of the regular auctions, we have a syndicated deal from EU with an expected issuance of EUR 5bn. However, the supply is absorbed by a very large French redemption.

FX: While the coming weeks will entail dividend-related NOK selling we still emphasize that NOK remains in the hands of the global reflation theme. EUR/SEK has re-established the 10.00-10.20 trading range with the cross back close to our 1M (mid-April) 10.10 target. We do not expect this week’s ECB meeting to be a major mover of EUR/USD.

Credit: Credit markets saw good performance on Friday where both Xover and Main tightened ½bp (to 244bp and 49½bp, respectively). IG bonds tightened ½bp and HY bonds closed 5bp tighter.

Nordic macro and markets

Norway: While the Norwegian government last week decided to postpone the final decision on the future role of AstraZeneca and Johnson & Johnson in the vaccination program (to 10 May) positive Pfizer news followed. On Friday Geir Bukholm from Norway’s Institute of Public Health (FHI) announced that Norway will receive an extra 700K Pfizer vaccines in both July and August which is in addition to the 592K vaccines that followed from Pfizer 50M extra delivery to the EU in Q2. In other words, Norway will receive 2M Pfizer more doses in June, July and August than previously expected. FHI has stated they will update the official vaccine calendar when the final delivery dates have been confirmed.

Sweden: Very thin agenda ahead of Riksbank monetary policy meeting next week, Valueguard releases HOX March property prices tomorrow, Tuesday. Riksbank continues its QE-program buying munis on Tuesday, CP’s and T-bills on Wednesday, covers on Thursday and SGB’s on Friday. Debt Office issues long-dated bonds on Wednesday. Besides this eyes are very much on earnings reports and rates’ reaction to these.


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