Thu, Jun 24, 2021 @ 03:51 GMT
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A One-Million US Jobs Report?

Market movers today

  • Today’s market highlight will be the US jobs report for April. In light of increasing reports about labour shortages in some sectors, we expect another strong month of jobs gains. Market consensus is looking for a one-million job gain.
  • After a marked decline in January and February that were at odds with strong business surveys, we expect today’s German industrial production figures to show an increase again in March. However, production stops due to supply bottlenecks especially in the important car sector create downside risks.
  • In Sweden the Debt Office releases the April borrowing requirement, while industrial production figures for March are released in Denmark

The 60 second overview

Macro: Fed is getting concerned about asset valuation: Yesterday, the US Federal Reserve said in its semi-annual report on financial stability that some asset valuations are “elevated relative to historical norms” and “may be vulnerable to significant declines should risk appetite fall”.

Not full dovish consensus in the Federal Reserve: Yesterday, Fed’s Kaplan (who has been more hawkish than the rest of governors) said he expects conditions for a rate hike to be met next year, as inflation may not be transitory know, distancing himself from other Fed governors. He also said that ending QE is not necessary before hiking for the first time. So far, financial markets has bought comfort in Fed not moving in a hawkish direction anytime yet.

Equities: Equities were mostly higher yesterday despite some back and forth. The narrative is still the same; price pressure, supply constraints and fear of higher inflation and ultimately higher yields down the road. Hence, we got yet another day with value outperforming growth, some growth names have been seriously sold off lately. Cyclicals stocks manage to beat defensive for a change and VIX ticked lower at the end of the day. In the US the Q1 blended earnings growth hit a remarkable point by crossing 50% growth Q1/Q1 (this should be seen in the light of analyst expectations being just 15% at the start of the year). Optimism is continuing this morning in Asia with broad based gains and also European and US futures are higher.

FI: 10Y German government bond yields remain range bound around the -20bp, while 10Y Treasuries has stabilised around 1.6%. In the short-term we expect these ranges to hold given the QE from both ECB and Federal Reserve. Furthermore, the 5y5y US inflation forward has stabilised around 2.4% and 1.5% in Euroland. This should also support the current range trading in both Bunds and Treasuries.

FX: Yesterday’s session was characterised by broad USD weakness with EUR/USD moving back above 1.2050. Also GBP posted losses which to a large extent we deem USD related and less so a reflection of the Bank of England message. NOK traded on the back-foot in European hours but erased most losses during the US session. EUR/SEK moved a few figures lower.

Credit: Credit markets were slightly soft yesterday where iTraxx Xover widened to 254bp (+3bp) and Main to 51bp (+1bp). HY closed around 1bp wider and IG unchanged.

Nordic macro and markets

As widely expected Norges Bank yesterday left monetary policy rates unchanged. Overall, the Monetary Policy Committee gave little news at this interim meeting and concluded with the same verbal guidance as in March: ‘In the Committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised in the latter half of 2021’. After the March meeting NB specified that the rate path should be interpreted as an even split in probability mass, i.e. 50/50, between a hike in September and December. There were no signals from NB yesterday that this probability has since been skewed towards either meeting. We still expect Norges Bank to hike rates in September – even if the government decides on excluding AstraZeneca and Johnson & Johnson on Monday.

In Denmark, this week’s Danish card and MobilePay spending shows spending significantly above normal last week. Overall data still looks strong following the reopening, and spending is well on track to outperform the reopening last spring, even after taking into account that it took place a few weeks later than this year (see more details here).

Today, the Swedish Debt Office releases the April borrowing requirement, it forecasts a SEK 24.9bn budget deficit. Note, however, that the borrowing has been SEK 26bn lower than expected in the two previous months suggesting the underlying trend with SEK 10-15bn better than projected performance per month (which has actually been the case since May 2020).


Danske Bank
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