Market movers today
Today is another quiet day in terms of data releases, in our view.
We will, however, keep an eye on Germany retail sales in November, preliminary French HICP inflation data for December and US ISM manufacturing (although we already received the equivalent US PMI manufacturing index).
Also look out for Danish FX reserves data, as EUR/DKK traded close to the 7.4360 FX intervention level from earlier last year through most of December.
The 60 second overview
Rising yields: The first trading day of the year started off slowly in the early European hours with UK still out for a bank holiday. However, upon US opening hours the risk positive market sentiment dominated, with a massive bond sell-off. US treasuries led the way with a 12bp sell-off in the 10y point, in a bear steepening move, for reasons including additional risk taking after year-end as well as omicron being milder leading to higher inflation speculation. The US sell-off drove European yields higher with Bunds touching -0.12% by rising 6bp. Intra-euro area spreads tightened. Today is rather light on data, but focus turns to euro area inflation prints and US labour market report.
Euro area PMIs: PMIs continued to suggest the pace of expansion is coming down across mainly services but also manufacturing. Although supply chain pressures remain widespread, euro area December PMIs also gave us some reasons to be a bit more optimistic towards the manufacturing sector outlook ahead: delivery times are coming down, production growth (notably in Germany) picked up, input and output cost pressures are easing and firms still remain optimistic with respect to the year-ahead outlook.
Equities: Equities made a flying start to 2022 as risk appetite soared on the first trading day of the year. Although equities were higher on both side of the Atlantic, the drivers were very different with much more defensive led gains in Europe while US was very cyclical-driven. Growth managed to outperform value despite the heavy lift to the long end of the US yield curve, partly driven by single stock news from Tesla and partly reflecting the still abundant level of liquidity.
In the US, Dow +0.7%, S&P 500 +0.6%, Nasdaq +1.2% and Russell 2000 +1.2%. Asian stocks mostly higher led by Japan (closed yesterday). China (Hang Seng) lagging as the bad news surrounding property developers are continuing this morning. Both European and US futures higher again this morning.
FI: The first trading day of the year started off slowly in the early European hours with UK still out for a bank holiday. However, upon US opening hours the risk positive market sentiment dominated, with a massive bond sell-off.
FX: EUR/USD dropped nearly a figure yesterday, trading below 1.13 at the time of writing. EUR/GBP also moved back below 0.84 in late trading yesterday. EUR/DKK bounced as high as 7.4383 yesterday, as carry on short EUR/DKK positions returned to negative carry after year-end.
Credit: With UK markets closed, activity in credit was limited yesterday and there was no trading in iTraxx indices. HY bonds tightened 3bp while IG widened 1bp.