Mon, Sep 20, 2021 @ 13:35 GMT
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Sunset Market Commentary

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Equity markets slipped at the European open as did US futures in the wake of the G7 Summit. Finance ministers over the weekend agreed to a global minimum tax rate of at least 15%, triggering a kneejerk downleg in stocks that ebbed away as trading evolved. EMU shares now trade 0.2-0.4% higher, Wall Street opens flat in extremely quiet trading; the VIX volatility index is near 2-year lows (16.65). That’s probably calm before the storm though, with a potentially important ECB policy meeting scheduled on Thursday. US CPI May readings also on Thursday for their part could stir up the inflation/taper debate again in the run-up to the Fed meeting next week. Core bond yields lick their wounds after Friday’s payrolls driven setback. The US yield curve bear steepens with changes varying from 0.8 bps (2y) over 1.9 bps (5y) to 2.2 bps (10y). The US 10y yield is now trading at 1.575%, thus posing no real threat to the 1.53% support area. German yields add 1 to 1.4 bps across the curve. From a technical perspective, the 10y yield gave up the upward trend channel by the end of May but support at -0.20% for now holds. Peripheral spreads don’t change one bit.

Nothing spectacular from the FX market either today. The dollar is an ocean of calm with the trade-weighted DXY just holding north of 90. EUR/USD is rangebound in a tight sideways channel near Friday’s close of 1.216/217. The Japanese yen is also better bid. USD/JPY slides further south after dropping sub 110 on Friday to change hands in the 109.2 zone. After failing to push through the 134 big figure last week, EUR/JPY staged a minor technical turnaround that brings the pair back just south of 133 today. EUR/GBP is hovering near the now well-known 0.86 area, unable to pick sides.

News Headlines

The Czech Ministry of Labour and social affairs today reported that the registered unemployment rate declined from 4.1 in April to 3.9% in May. 285.800 people were unemployed to be compared with job vacancies of 346.600, illustrating ongoing tightness in the labour market as the economy reopens. Other data showed April industrial output jumping 55.1% Y/Y from 18.2% Y/Y in April. The April trade surplus widened further from CZK 17.6 bln to 19.3 bln. EUR/CZK is drifting below 25.40, nearing the strongest level of 2021 against the euro.

According to mortgage lender Halifax, British house prices rose in May 1.3% M/M to be 9.5% higher compared to the same period a year earlier. The figure marks the biggest rise since July 2014. Market activity was said to be boosted by a government stamp duty holiday, with buyers racing to complete purchases in to benefit from the maximum tax break ahead of the June deadline. However, according to managing director Galley, current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift as greater demand for properties with more space might warrant an increased willingness to spend a higher proportion of income on housing.

In the proposed budget for the fiscal year that starts in October, the US administration raised the estimate for the losses on portfolio of the student loans of the federal government by $ 53 bln to $ 68 bln, the WSJ reports. The total amount of outstanding student loan debt currently is close to $1.6 trillion. Amongst others, the higher loss estimate reflects lower repayments and pandemic relief arrangements. Some measures taken during the pandemic allowed suspension of payments which the Biden administration extended to September 30.

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This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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