Market movers today
This week will be quiet in terms of key data releases as markets await the final ECB and Fed meetings of the year on 14 and 15 December.
In euro area, October retail sales will be released today, but focus will mostly remain on final ECB comments ahead of the blackout period starting on Thursday.
Following Friday’s strong US jobs report, today we will get the ISM services index. It will be interesting to see if private consumption has truly cracked in November after PMIs signalled clearly weakening growth earlier.
Later in the week, we have the Reserve Bank of Australia meeting on Tuesday, where we expect a 25bp hike.
The 60 second overview
US job report: The US jobs report on Friday was quite strong with 263k jobs created in November compared to 200k expected and a revised 284k in October. Wage growth also edged higher once again rising 0.6% m/m or 5.1% y/y. That said, the less important household survey was weaker. Hence, the unemployment rate was unchanged 3.7%. We also note that the participation rate declined even further indicating a growing labour shortage as reflected in the higher wage growth. Employment gains were broad-based across sectors, so overall a strong report that underlines that the Fed has more work to do. Hence, the verdict is still out whether the Fed will hike 50bp or 75bp next week though the recent Powell comments do point towards ‘a small’ 50bp hike. The market is pricing some 55bp hike next week.
Initially, yields and the USD dollar rose on the numbers though the moves reversed as the markets took its direction from the somewhat weaker household survey.
Oil market: During the weekend the EU and later G7 presented its USD 60 a barrel price cap on Russian oil. The ceiling indicates the maximum price that shipping companies that want insurance or financing in the EU or Great Britain are allowed to pay for Russian oil. The ceiling came into effect by midnight at the same time as it became prohibited to import seaborne Russian oil into the EU. The ceiling therefore concerns Russian oil to third countries such as China, India and Turkey. The cap remains significantly above what much of Russian oil is sold for today underlining that the G7 was not ready to introduce a cap that could significantly hamper Russian oil export. As expected, OPEC+ kept production quotas unchanged at the meeting yesterday. We should expect a volatile week in global oil markets as the impact of the price cap is evaluated. But the oil market will probably quickly return its’ focus to the demand side with focus on a possible Chinese reopening and the important policy meetings next week being the main drivers. Brent initially opened up 1.5 USD higher this morning but hA eased somewhat now.
China: Media reports that testing requirements have been eased in Shanghai, which is seen as yet another sign that China is moving towards an easing of its zero-Covid policy. If these changes are seen in other Chinese cities it should boost market optimism this week.
ECB: Yesterday, French ECB member Villeroy said he favours a 50bp hike when the ECB meets next week.
Equities: Performance briefly reversed on Friday as yields surged on the jobs report, bringing equities lower and high multiple stocks too. Yet, within moments S&P recouped its losses to -0.1% as yields dropped back and suddenly tech underperformed just mildly. Similarly, Nordic quality (NIBE, Atlas) even outperformed banks on Friday. So, good week for stocks overall. Nasdaq is up 4% within a week and MSCI Nordics 1.5%. Our preferred sectors real estate, communications and healthcare have beat the index superiorly.
FI: The stronger than expected US labour market report on Friday supported the expectations for a continued tightening of US monetary policy. The initial reaction to the labour market report was a solid sell-off in the global bond markets. However, the sell-off was short-lived and US Treasuries ended lower at the end of the day.
FX: Brief bounce in broad USD on Friday on the back of the US jobs report that sent EUR/USD temporarily down to 1.04 and USD/JPY close to 136. Oil market took the news of EU agreeing to price cap on Russian oil exports with relative calm.
Credit: A relatively quiet day both on the primary and secondary sides concluded the week. ITraxx main was unchanged at 88bp while Xover was unchanged at 443bp.
Sweden: The Riksbank is publishing the minutes from the monetary policy meeting where markets will look for signs of a possible pivot towards smaller repo rate increases going forward. Swedish service PMI numbers likely to reach new lows after last month’s slight uptick.