Market movers today
The G20 leaders’ summit is kicking off in Bali and markets will be attuned to any geopolitical headlines.
In the euro area, German ZEW expectations for November are on the agenda and it will be interesting to see whether the October uptick extends for another month amid easing energy crisis fears. ECB’s Panetta and De Guindos will also be on the wires.
In Sweden we expect October headline CPIF to print -0.1% m/m/9.3% y/y and core CPIF excl. energy to print +0.4% m/m/7.4% y/y. That means headline would be lower than Riksbank’s forecast and core would be spot on.
In Denmark, preliminary growth figures for Q3 22 are due with the publication of the GDP indicator.
The 60 second overview
There is positive sentiment in the Asian equity markets this morning as tensions between China and US are showing signs of easing. Furthermore, the easing of Covid restrictions in China as well as support for the Chinese property sector combined with the Chinese central bank providing plenty of liquidity is also supporting the positive sentiment.
Comments from Fed’s Brainard supported the Federals Reserve’s narrative that it will soon be appropriate to slow down rate hikes. However, the comments had a fairly limited impact on the markets.
This morning Japanese GDP data for Q3 unexpectedly shrank as GDP fell 1.2% (q/q annualised) relative to an expected growth of 1.2%. This was driven by lower consumer spending and on the back of a surge in Covid during Q3.
Equities: Equity performance reversed on Monday with cyclicals and yield sensitive sectors, especially real estate, underperforming. Sector performance fairly bunched though, with few market movers during the session. S&P -0.9%, Nasdaq -1.1% and Russell-1.1%. Futures are slightly higher this morning.
FI: There was a modest steepening of the European government bond yield curves from the short end with a modest decline in bond yields. US Treasury yields rose, but this was mainly a “lagged” effect as the US market was closed on Friday, when global yields rose.
FX: Yesterday saw some reversion of last week’s moves, with stronger USD and weaker Scandies. JPY was the biggest loser within G10, despite lower oil price. Within CEE, both PLN and HUF gave up all gains from last week, whereas CZK traded steady.
Credit: Amidst continued heavy primary market activity, sentiment remained strong in credit markets, with iTraxx Xover tightening 5bp and Main 1.5bp.
Nordic macro
In Sweden we expect October headline CPIF to print -0.1% m/m / 9.3% y/y and core CPIF excl. Energy to print +0.4% m/m / 7.4% y/y. That means headline would be lower than Riksbank’s forecast and core would be spot on. Headline is being pulled down by plunging electricity prices, but energy as a whole is balanced by sharply higher fuel prices. Among core inflation components, recreation, food and clothing contribute the most. CPI, which includes the effect of higher mortgage costs, is hit by about 10% m/m higher mortgage cost as Riksbank 100bp September hike adds another 0.3 percentage points to CPI inflation.
Despite inflation realising roughly in line with the Riksbank’s forecast from September, we still expect them to hike the policy rate more than their current path suggests at next week’s meeting, where we see +75bp compared to the Riksbank forecast just below 50bp. This as international central banks have been more aggressive than the Riksbank projected in September.
Yesterday, we published a new forecast for Danish inflation in 2022 and 2023. We have revised up the forecast on the back of higher electricity prices. Hence, headline inflation is expected to be 7.9% for 2022 and 4.9% for 2023. Our old forecast was 7.5% and 3.4%. See more in Denmark. High inflation for longer, 14 November.
