Mon, Jun 21, 2021 @ 04:57 GMT
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Slow Day With ZEW In Focus

Market movers today

  • The German ZEW index for May is due for release, we expect the figures to paint a constructive picture of the ongoing recovery. We will also have a number of Fed speeches in the evening, including Williams, Brainard, Daly, Bostic, Harker and Kashkari.
  • In Poland, the key event is the supreme court verdict on Polish banks’ compensation of CHF loan borrowers, which can have quite big implications for banks and the Polish currency. There is no time set for the decision, but it might come in the afternoon (see FX section for more details).

The 60 second overview

Macro: In Norway, the expert group and FHI recommended removing AstraZeneca and Johnson&Johnson, while the expert group was divided on the potential for voluntary use. The government will now take the recommendations into account and we will get the decision “soon”. It seems very difficult to imagine them deviating from the recommendations. The question is whether voluntary use will be allowed. The FHI project all adults to have received the first dose offer by week 29 which is only a couple of weeks later than if the virus vector vaccines had been included (and broadly in line with the assumptions behind the March Norges Bank rate path). We still think September is the most likely timing for the first Norges Bank 25bp rate hike. Markets price roughly 12bp worth of hikes for the September meeting.

Vaccine: In the US, the FDA authorized the Pfizer-BioNTech Vaccine for 12- to 15-Year-Olds for emergency use. The application is also with EMA right now, however it has not been examined yet.

Sweden: At a Danske Bank hosted Webinar Riksbank’s Henry Ohlsson was quite positive on the economic outlook and indicated that he is not very fond with negative rates, saying “people find it strange”. In the minutes released this morning, Ohlsson continues to be the sole Board member that does not mention the door to negative is open – all other members see that as a plausible policy response if credibility is challenged.

Equities: What looked like a muted session in Europe, turned out to a sharp sell-off in some US indices. As we mentioned yesterday, the job market report miss was not enough to derail momentum in the reflation trade. Instead, growth sold of sharply while value and especially defensives outperformed. In the US, tech, consumer discretionary, and communication services were all down -3% to 2% with the FANMAG complex broadly lower. In contrast, consumer staples and real estate gained around 1% while the value-intense sectors like banks and materials traded unchanged. Big dispersion among US indices, with Nasdaq and Russell 2000 down a massive -2.6%, S&P 500 “only” -1%, and Dow -0.1%. The inflation scare lingers in Asia this morning, with Japan down almost -3%. The growth sell-off looks to linger, with US futures indicating another bloody session in Nasdaq and Russell 2000.

FI: The most interesting action in yesterday’s trading session was the BTP-Bund spread tightening by 4bp after four consecutive trading sessions with spreads widening. Italian-German spread now stands at 113bp. Outright yields in other jurisdictions moved very little. Bund spreads tightened and our Bund spread widener recommendation has been under pressure heading into the new 30y Green bond that was announced yesterday. The ECB’s PEPP net increase was only EUR16.3bn last week, which were the lowest in three weeks.

FX: EUR/USD moved a tad lower yesterday in the late trading hours but remained above 1.21 on a day with no major news or data releases to drive markets. EUR/GBP moved a full figure lower to below 0.86 yesterday following the Scottish Parliament election. NOK weakened slightly yesterday amid a slide in oil prices/risk.

Credit: Credit markets were more or less unchanged yesterday with both iTraxx Xover and Main unchanged at 251bp and 50bp, respectively. HY widened 1bp and IG was unchanged.

Nordic macro and markets

In Norway, the government will publish the Revised budget for 2021. We expect no major news, but keep in mind that actual spending was considerably lower than expected in 2020. In turn, this will ‘automatically’ imply a more expansionary effect in 2021, measured by the fiscal budget indicator.

In Sweden, Prospera releases their monthly inflation expectations survey at 08.00 CET. Expectations have recovered and stabilized following the plunge last year at the onset of the pandemic, and given recent inflation dynamics there is nothing to indicate that this trend should reverse just yet. Bear in mind however that this is the “small” survey, and hence carry lesser weight in markets than the big, quarterly survey. Thus, do not expect any buzz around this release.


Danske Bank
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