Market movers today
- The main event of the day will be the ECB meeting although no new signals are expected. We look for a broadly balanced growth risk assessment that paves the way for PEPP buying to reverse to around EUR60bn/ month after the June meeting. Lagarde will face questions on the PEPP buying behaviour which up until two weeks ago was underwhelming. Our ECB Preview-An appetizer for the June meeting. As usual, the press release will be published at 13:45 CET while the press conference begins at 14:30 CET.
- On the data front, we will get the weekly jobless claims from the US and April flash consumer confidence from the Euro Area.
The 60 second overview
Covid-19: The US administration is apparently considering a waiver of intellectual-property protections. A move that is meant to accelerate global access to Covid-19 vaccines and other critical medical goods.
Iran: A US official yesterday hinted that even though negotiations could begin a revival of the 2015 nuclear deal is still far away. Gaps remain wide with respect to what is need to get compliance back.
Canada: Bank of Canada has started to move in a more hawkish direction – on of the first G10 central banks to do so. At yesterday’s monetary policy meeting it tapered its QE purchases and moved forward its forward guidance on policy rates to H2 2022.
Oil: Oil prices slipped back yesterday with dropping to USD65/bbl after the US weekly oil inventory report showed a rise in US inventories. In addition, the Federal Government continued to sell strategic reserves for a second straight week.
Equities: Risk appetite came back yesterday with equities gaining and the ending close today high in the US session. Small-cap stocks in solid comeback yesterday with value and growth performed equally good just as cyclical and defensives. In US, Dow +0.9%, S&P 500 +0.9%, Nasdaq +1.2%, Russell 2000 +2.4%. Asian markets are mixed this morning with Japanese stocks outperforming after it has been lagging its peers for a while. US futures are flat while European ones are higher in the ballpark of 0.5%.
FI: European core and semi-core rates ended a tad lower on the day, mostly within 0.5bp while waiting for the ECB meeting today. Periphery gained as the German constitutional court rejected the injunction against raising common EU debt. While it’s not a full verdict it is important for the ratification process. As a result Italian-Bund spreads tightened 2.6bp on the day although the spread is still above the 100bp where it has been hovering since Easter. Bunds spreads were volatile yesterday but ended broadly unchanged. We have recommended going long the Bund ASW-spread at 34bp.
FX: Following a mild sell-off on the back of weak equities on Wednesday, we conversely saw Scandies claw back a tad yesterday as US and European risk assets rallied. Today we will hear from ECB and next week, Fed. Both meetings are set to be quite uneventful in the sense that they are both warming up to future potential policy changes, none of which are likely to be announced or officially considered just yet.
Credit: Though CDS indices recovered some of Tuesday’s lost ground, cash bonds were still under pressure. Xover tightened to 252bp (-2bp) and Main ended marginally tighter in 51bp. IG bonds widened ½bp and HY closed around 4bp wider.
Nordic macro and markets
In Norway, the manufacturing confidence for Q1 is released. The monthly PMI data have signalled a clear upswing in manufacturing activity in recent months. A strong upswing in the global manufacturing activity and signs of improvement in the oil industry would seem to be the most important reasons for this. Based on the PMI, we expect the manufacturing confidence indicator to climb to around 5, with risk tilted to the upside.