Market movers today
With a light data calendar today, markets will remain in wait-and-see mode ahead of tomorrow’s FOMC meeting and monitor the Russia-Ukraine developments.
After German PMIs surprised on the upside yesterday, it will be interesting to see whether the German IFO index also signals a rebound in the growth momentum during January.
In the US, consumer confidence for January is due out, which could take a further hit from the Omicron impact.
In Sweden, inflation expectations will be in focus.
The 60 second overview
Global growth: Euro area business activity continued to slow at the start of 2022 according to PMIs, although with diverging trends across sectors and regions. Especially Germany’s economy staged a rebound, as services activity remained surprisingly resilient in light of Omicron headwinds and manufacturing momentum picked up as supply bottlenecks continued to ease. US services activity also cooled noticeably in January, while high price pressures remain a concern in both regions.
Markets: risk sentiment took a turn for the worse on Monday and the VIX volatility gauge rose to the highest level since early December. Oil prices retreated to USD 86/bbl and German Bund yields slipped back below -0.1%, after touching positive territory last week. Both upcoming Fed tightening (FOMC tomorrow) and rising geopolitical tensions in the Russia-Ukraine dispute (US putting 8500 NATO troops on alert for deployment) contributed to the risk-off mood.
Equities: While a cocktail of valuation- macro and earnings scare corrected European markets by -5% lower (worst one day performance since March 2020), US markets staged a significant rebound. S&P 500 recovered a -4% correction in the opening hours, to close up 0.3%. Investors bought the dip in growth, but most sectors were higher in risk on-manner. Consumer discretionary and industrials led the market and defensives lagged. Small caps outperformed massively, with Russell 2000 up 2.3% vs Dow 0.3% and Nasdaq 0.6%. However, the rebound is not spilling over to Asia, with markets 1-2% lower and US futures back in red this morning (led by tech).
FI: Yesterday’s European session was a traditional flight to safety with risk assets underperforming and safe haven assets performing. Until late in the US trading session, lower yields seemed to be the foregone conclusion of the day, but a sharp reversal, with 10Y US Treasuries up by 5bp, left the 10Y point virtually unchanged on the day.
FX: EUR/CHF moved lower yesterday and EUR/Scandies higher as risk aversion rose.
Credit: Credit markets – and the high-beta segment in particular – saw significant pressure yesterday. iTraxx Xover widened 12bp to 282bp and Main widened 2.7bp to 58bp. HY bonds closed 10bp while and IG held up better and finished unchanged for the day.
Nordic macro
The only item on today’s Swedish agenda is Prospera’s montly (small, only money market participants) inflation expectations survey. On all horizons (1y, 2y and 5y), expectations are back at 2%, but have yet to surge substantially above the 2%-anchor. We do not expect this to be the case this time around either, although it is possible that especially the shorter ones might continue to climb somewhat, whereas the 5y expectations are likely to remain at, or close to, 2% until there are any signs of more broad-based inflation pressures in Swedish data.
