Market movers today
- Today’s calendar is light in terms of economic data, US weekly jobless claims are released in the afternoon. We will also have a range of central bank speakers throughout the day.
The 60 second overview
FOMC minutes: The most important takeaway from the FOMC minutes was that the Fed may only be a few meetings away from starting discussing “a plan for adjusting the pace of asset purchases”, assuming the economy continued to make rapid progress. We still expect a shift in rhetoric at the September meeting, as the Fed by then will have seen several (in our view strong) jobs reports.
Supply chains: Cisco, the American technology conglomerate, said yesterday that it had seen its profit margins being squeezed by some 1.5 percentage points in 2021 following supply chain issues while specifically referring to chips as the primary problem. For now, Cisco has chosen to absorb the higher costs and thereby not hiking consumer prices although this could happen if the higher costs are at some point seen as being present also in the longer run. Whether or not manufacturers who are seeing higher input costs choose to increase prices on output as well remains key for the inflation outlook. For more on supply chains and inflation see here: Global manufacturing heading for a hot (inflation) summer, 12 May.
Equities: Equities lower across regions yesterday driven by a sell-off in materials and energy stocks. Huge intraday volatility with some investors maybe being a bit spooked by the turmoil going on in crypto space. Growth outperformed value with tech for a change being the only sector higher. VIX in another move higher, closing north of 22. Despite the move lower yesterday, we saw US equities finishing at day highs and hence ending in only smaller loses. Dow -0.5%, S&P 500 -0.3%, Nasdaq -0.03% and Russell 2000 -0.8%. Asia is a mixed bag this morning with most markets surfing around their starting levels. European futures are somewhat higher after underperformance yesterday while US futures are off early morning lows.
FI: European rates had a relatively volatile intraday session yesterday, yet ended less than 1bp lower in the bullish flattening move. Intra-euro area spreads widened slightly in weak risk sentiment. While the appetite for duration is still present, the recent issuance has seen slightly less demand as European rates are finding itself in a fragile limbo with inflation and ECB at the centre of the equation. Bund spreads have recovered slightly, but remain somewhat below our target range of 34-38bp. The 3bp rally in Bunds this afternoon where market speculation on spill-over from the collapse in crypto assets, was broadly reversed within 1h.
FX: Yesterday, the dollar rose while the SEK took a dive along with risk sentiment as EUR/SEK moved from the lower to the upper end of the 10.10-10.20 range. SEK investors should continue to keep a close eye on global factors including risky assets as equities and commodities alongside the USD.
Credit: Another risk-off day in credit where iTraxx Xover widened 5bp (closing in on 261bp) and Main 1bp (to 52bp). HY widened 5bp and IG ½bp.
Nordic macro and markets
Riksbank deputy governor Skingsley speaks at 13:30 local time, “Where is monetary policy heading?”. Despite the title, it appears that the speech mainly concerns the monetary policy framework rather than actual policy.
