Market movers today
Today we get the final PMIs from Europe and the US. In the US, ADP employment report and mortgage data will also be released ahead of non-farm payrolls on Friday.
Overnight, we will get March PMIs from China. In central bank calendar, we have Fed’s Mester and ECB’s Vujcic and Lane on the wires.
The 60 second overview
This morning the Central Bank of New Zealand (RBNZ) raised its monetary policy rate by 50bp. This was a surprise as the consensus expectations for was for a 25bp rate hike, but the RBNZ stated that inflation was too high and persistent.
One of the Federal Reserve officials Loretta Mester has stated that US policy rates should be raised above 5% and stay there for some time. The exact level and timing depends on how quickly the price pressure eases, but in her view monetary policy needs to move “somewhat further into restrictive territory”.
The oil price continued up, but it was a modest rise. US Treasury yields rose very modestly in Asian trade after the solid decline yesterday.
Equities: Global equities lower yesterday, dragged down by US and partly Europe. Bear in mind the setback came after equities rallying in 7 out of the last 8 sessions. However, the interesting part yesterday was the sector rotation and cross asset performance. We got a softish macro number, yields pulling lower, VIX higher and a deep defensive rotation. In other words, what would be ultra-classic dynamics when recession fear is increasing. Hence, this is very different from the correlations seen over that last three weeks where lack of banking confidence was the main driver for markets. In US yesterday, Dow -0.6%, S&P 500 -0.6%, Nasdaq -0.5% and Russell 2000 -1.8%. Asian markets are mixed this morning with the Japanese market pulling lower. European and US futures are fluctuating between gains and losses.
FI: Up until the poor US JOLTS release in the afternoon, it was a broad risk on in global markets that sent rates 8bp higher in a curve steepening move since the morning with little news flow generally. Also the significant supply from Germany, Austria and the Netherlands on top of the 8y Italian green deal contributed to the move higher in yields as well. However, the JOLTS report reversed all the aforementioned moves and left the 10y point broadly unchanged on the day. Front end rallied 6-8bp.
FX: Yesterday, the USD broadly weakened sending EUR/USD above 1.095 on the back of weaker-than-expected US job openings and factory orders, which led US yields to decline. EUR/SEK fell to 11.26 while EUR/NOK increased to 11.30. EUR/GBP sharply declined but recovered during the day and ended around 0.876. USD/JPY fell below 132.
Credit: The liquidity in the credit markets remained underwhelming yesterday. The overall mood took a turn for the worse towards the end of the day, fuelled by renewed worries about the US economy and its banking sector. ITraxx Main shed 1.8bp ending at +87.5bp while Xover widened 11.5bp ending at 457bp. The primary markets continued its decent activity, with especially the SEK market being quite active as exemplified by a three tranced SEK1.5bn Sveaskog print, where the 5 year tenor fixed at a coupon of 4.235%.
