Market movers today
- Today we get the August inflation print, which is the last inflation release before the September ECB meeting. Following yesterday’s high German inflation print, we expect a noticeable rise in Euro zone inflation, where we look for a rise in Euro core inflation to 1.3% in August from 0.7% in July.
- In Denmark we expect gross unemployment has declined slightly in July following big declines in May and June.
- Overnight we get the Chinese Caixin manufacturing PMI and we get PMIs out of South East Asia. Here it will be very interesting to see what broken supply chains and local lockdowns in hard hit countries such as Malaysia, Vietnam, Thailand and the Philippines have done to manufacturing activity.
The 60 second overview
Markets: Global markets were still digesting the comments from Powell on Friday. With UK out for a bank holiday, bond yields ended marginally lower, with spreads to Bunds tighter. Equities continued to rise on continued support from the monetary policy side.
Asian markets are mixed this morning with Hong Kong lower as Chinese service PMI softened in August on the back of increased restrictions following spikes in the delta variant. European and US futures slightly higher this morning.
China: The Chinese PMI released over night was weaker than market consensus, with notably the non-manufacturing component missing the estimate, and declined to 47.5 which is the lowest level in more than a decade (except for the prints in the acute start of the pandemic). This is another print supporting our view that the global cycle peak is behind us.
COVID: With the spreading of the virus in certain parts of the US, the EU removed US from the safe-travel list.
Equities: Global stocks were higher yesterday as the goldilocks thinking dominated on the back of the dovish surprise from Powel Friday. With US 10 year yields dropping back below 1.3% growth stocks were the notable outperformer of value yesterday with the FAMMAG universe leading the way. Banks a clear underperformer together with energy despite oil price ending higher. In US S&P500 posted the 12th record high for the month and 53th for the year, index gain passed 20% yesterday. Dow -0.2%, S&P 500 +0.4%, Nasdaq +0.9% and Russell 2000 -0.5%.
FI: Yesterday’s trading session can best be described as a wait-and-see with the UK being out for bank holiday and month-end approaching. The most important release near term is the US labour market report on Friday, with FOMC tapering eventually coming.
FX: Yesterday’s session marked a fairly slow start to the week for FX markets with bilateral currency moves vs the EUR kept within +/- 1stdev. EUR/USD remained steady around 1.18 while both EUR/NOK and EUR/SEK edged a few figures lower.
Credit: Credit performance was mixed yesterday where iTraxx Xover tightened 3.8bp (closing in 228.7bp) and Main 0.8bp, taking it to 45.2bp. Cash bonds were less strong, with HY closing broadly unchanged and IG widening around ½bp.
Nordic macro
Riksbank Deputy Governor Martin Flodèn speaks about monetary policy and the current economic situation at 14.00 CET. Riksbank buys SEK3bn muni bonds. Danske Bank has released the August Boprisindicator showing price developments for Stockholm condos this morning.
