Market movers today
- Today, Norges Bank is expected to stay on hold, but to confirm an upcoming rate hike in September (for more details, see the Nordic Macro section below).
- In the US, jobless claims will attract some attention as focus among the Fed members is currently on job market recovery.
- The regional Philly Fed is expected to rebound in August after several months with weak readings.
The 60 second overview
Macro: FOMC Minutes did not offer much new information to the market on the path towards tapering of bonds – as expected most participants ‘judged that it could be appropriate to start reducing the pace of asset purchases this year’. However, investors still reacted negatively to the prospects about US monetary policy tightening amid weakening global macro momentum, as global risk sentiment weakened with equity markets sell-off (see below) and EUR/USD breaking through the 1.17 level overnight. Next focal point is the Jackson Hole conference next week, where markets will focus on any taper comments. We expect an announcement in the fall and tapering to start in December.
Equities: Global equities lower yesterday dragged down by US stocks taking a sharp drop the last trading hour. Sell-off in US stocks relatively broad based while defensive did a lot better than cyclicals in in Europe. Consumer discretionary got a little tailwind in the US after very solid earnings results and Tesla moving higher. Worth having in mind the VIX index higher for its third session and now topping 21. This does not match the very solid macro picture we still have but is more a picture of how unsafe professional investors feel in the current bull market. Asian markets are weaker this morning dragged down by Hang Seng. European futures lower by 0.5% this morning as they are catching up with the weak US session yesterday. US futures in a small decline.
FI: European rates traded mostly sideways, while waiting for the FOMC minutes, with mixed performance of the intra-euro area spreads to Bunds. The FOMC minutes yesterday was on the slight dovish side leaving US Treasuries 2bp lower at 1.27%.
FX: Amid little actual news EUR/USD went below 1.17 yesterday. We continue to see downside risk to spot.
Credit: Sentiment stabilized in credit markets yesterday. iTraxx Xover tightened 1.3bp (to 235bp) and Main 0.2bp (to 46.4bp). HY bonds finished around ½bp wider and IG was unchanged.
Nordic macro
Today, Norges Bank is expected to stay on hold, but to confirm an upcoming rate hike in September. The meeting is a so-called intermediate meeting, which means no new monetary policy report and there will be no press conference. Norges Bank will only issue a press release. See our preview: Norges Bank Preview No change, but paving the way for a September hike, 18 August 2021.
