Market movers today
- We start the week in a quiet fashion, with no real market movers on the agenda. ECB Vice President De Guindos and Bundesbank President Weidmann will speak in the afternoon. The European Commission releases its summer economic forecast update.
- In Sweden, Stefan Löfven PM faces a decision to either resign (in which case the speaker looks for other government constellations) or announce a snap election.
- Later this week the euro area inflation figures, Chinese PMI manufacturing, Riksbank meeting and the US labour market report will be in focus.
The 60 second overview
Overnight session: It has been quite an uneventful overnight session with most equity indices virtually unchanged, however with the exception of the Australian equity markets which dropped as Sydney went into a two-week lockdown.
French regional elections: This weekend’s French regional elections was a disappointment for both PM Macron and far-right leader Le Pen. Macron’s LREM got only 7% of the votes while Le Pen’s is set to get around 20% (less than in 2015 election at 27%) according to exit polls. However, with low voter turnout, and local elections not translating well into national politics, these results should be interpreted with caution. French national election is set for spring 2022.
Equities: Investors sealed the week on a broadly positive note. Most regions ended higher, taking MSCI World to breach a new all-time high. Gains were broad-based with little distinction between styles and sectors, although some preference towards value and defensives. Financials were the standout on slightly higher yields and stress test results. Utilities, consumer staples and real estate were also among best sectors, while big tech drove down the IT- and communication sector. In US, Dow 0.7%, S&P 500 0.3%, Nasdaq -0.1% and Russell 2000 unchanged. VIX drifted lower for the fifth consecutive day, closing at one year-lows. The positive momentum has carried on to US futures this morning, but Asian markets are trading mixed with small movements.
FI: European rates were under slight pressure on Friday. The mood was a general bearish curve steepener – also within the US trading hours. Speculation on long-end issuance in this and the coming week (potentially France coming with new 30y) may have led market participants to pre-position for the supply. 30y Germany yields up by 4bp on Friday. After the massive flattening on the back of the FOMC meeting with markets questioning the reflation theme, last week was more or less a continued steepening of the EUR curves. 10s30s EUR swap flattened 6bp after the FOMC meeting, but has recovered more than half of the drop since then.
FX: Last week brought a reversal of post-Fed moves; the USD weakened, commodity currencies gained and industrial sensitive currencies stabilised. EUR/USD is consequently back above 1.19 while both EUR/NOK and EUR/SEK are now back below 10.15.
Credit: CDS indices once again outperformed cash on Friday, where iTraxx Xover tightened to 225bp (-2bp), which is the lowest level it has reached since late February 2020, and Main tightened ½bp (to 45½bp). HY widened c.4bp while IG was unchanged.
Swedish retail sales has experienced a very strong recovery this year as people have spent less on traveling and restaurants. There was some setback in April, which we however suspect was temporary. We expect another strong figure in May data released today (forecast 1% m/m and 7% y/y).