Market movers today
- Focus today will turn to US retail sales for September. The very high level of US retail sales is a key factor behind the strong goods demand we see globally, and while it has levelled off from the peak in April, it is still very robust. It will be important for bottle necks and inflation pressures whether sales hold up or start to come lower. Consensus is for a rise of 0.5% m/m in core sales so not expecting a big relief on this front.
- US also releases consumer confidence from University of Michigan. Apart from the overall confidence level, which has taken a hit lately, the inflation expectations component will be equally important to watch.
- Finally, the US Empire index is up for release. It rebounded to a strong level last month and is expected to drop back again this month.
- Apart from above numbers also keep an eye on gas markets where prices have started to climb higher again.
The 60 second overview
Macro: Global risk sentiment has generally been positive over the past 24 hours. Solid earnings as well as falling US jobless claims supported this, leading to the biggest increase in the S&P500 since March. The positive risk sentiment from the US has also spilled over to the Asian trading session this morning.
Chinese headlines have taken some focus in the past two days, where the main take-away is that the downward pressure on growth continues and that the stress in credit markets keep worsening. Price pressures add strain on producers but with little spill-over to consumers. We expect the government to soon roll out new stimulus measures but so far there has been limited news on that front.
US debt ceiling: US President Biden signed a short-term funding bill to avert a government shutdown. However, this postponement of the debt ceiling has just kicked the can a few months, so in the course of November we will hear similar discussions as recently.
Equities: Risk appetite returned at full strength on Thursday with most markets significantly higher. The inflation trade reversed and in its place growth and long duration led the gains. In the US, S&P jumped 1.7% (now only -2% off record highs), Dow 1.6%, Nasdaq 1.7% and Russell 2000 1.4%. Besides growth intense sectors (tech, communication services), materials was the standout as commodity prices are rallying. Implied volatility dropped substantially, with VIX at 18 which is the lowest since September. The buoyant sentiment is continuing into this Friday, with solid gains in Asia and US futures higher.
FI: After a choppy session in the early trading hours, the relentless rally similar to the bullish flattening on Wednesday continued. The 10y+ German Bunds led the EGB rally and ended 6bp lower on the day. A hawkish comment from Knot did not weigh on markets, while BoE’s Mann (dove) pushed somewhat back on the current narrative of an early hike saying that she ‘can wait’. The long-end US rates declined yet again and is 15bp lower in the past three days on a significant repricing on the recent sell-off.
FX: USD reversed lower on broad basis past couple of days. EUR/USD rebounded back towards 1.16 and GBP/USD to around 1.37. Scandies continue to perform, with EUR/NOK briefly falling below 9.80 and EUR/SEK below 10.00.
Credit: Sentiment improved further in credit yesterday – particularly in the high-beta segment where Xover tightened a whole 13bp and Main 2.2bp. HY bonds closed almost 5bp tighter while IG was unchanged.
