Market movers today
Today in the US, we have revised Q1 GDP data. It will also be interesting to see if initial jobless claims continue higher.
The Swedish National Debt Office releases a new borrowing forecast, see more below.
The central bank of Turkey concludes a meeting where consensus is for an unchanged repo rate of 8.50%.
We will also keep an eye on the early May Tokyo inflation release we get overnight. Increasing inflation in Japan is adding pressure on the BoJ to loosen the grip on the yield curve.
The 60 second overview
US: FOMC minutes from the latest meeting dismissed the near-term possibility of rate cuts and signalled a more cautious stance on the need for more rate hikes. Finally, it repeated the message that the Fed stands ready to act if debt ceiling situation would risk financial stability.
Fed: Another day went by with no solution to the debt ceiling. House Speaker McCarthy said a deal was possible before 1 June, which could mark the so-called x-date, where US risks running out of money. Meanwhile anxiety grows in the T-bill market about what would happen if US reaches the debt ceiling. Yields on T-bills maturing in the first week of June rose to around 7% yesterday. Fitch moved US to ‘rating watch negative’, which threatens its AAA-rating.
Oil: Brent rose to around USD78/bbl yesterday as the oil market defied the overall setback in risk sentiment seen across equity markets and the rest of commodity markets. The weekly US inventory report showed further US selling of strategic reserves last week, albeit the pace of selling has slowed.
Equities: Global equities fell yesterday, reversing the Tuesday gains and rotations. Not one single trigger for the risk-off mode yesterday, but one could point at UK CPI, German IFO, FOMC minutes or lag of breakthrough in debt ceiling debt as arguments for taking some chips of the table. One thing for sure, Fed and BoE got reprised yesterday and correlation between yields and equities shifted back into negative territory. Hence, it would be fair to blame a bit of the risk-off on renewed inflation fear. In US yesterday Dow -0.8%, S&P 500 -0.7%, Nasdaq -0.6% and Russell 2000 -1.2%. Asian markets are lower this morning led by China while Japan is rising against the trend. Please note how Japan has been outperforming lately despite value being underperforming. US and European futures are marginally higher this morning. However, focus is on the Nasdaq futures rallying as much as 1.7% after Nvidia surged more than 25% on strong revenue outlook.
FI: Surprisingly high UK CPI data sent global yields higher from the morning, although seen over the day the European rates were broadly unchanged in the 5-10y region. The curve flattened from the long end as investors added further bp to the peak, further rate hikes both in the UK and the Euro area. For the ECB, markets added 3bp and are now pricing in a peak policy rate of 3.83% in ECB, which is the highest since one month ago.
FX: Overall poor risk sentiment continues to underpin the USD vs G10 peers. Meanwhile, divergent cross-Atlantic macro momentum (PMIs and IFO this week) helps pull EUR/USD lower. Scandies and antipodeans underperform. EUR/SEK took out a new year high and is now trading above 11.50 whilst EUR/NOK is stuck around 11.80.
Credit: The credit markets were categorised by a full risk-off session yesterday on the back of elevated concerns about the US debt ceiling. Itraxx Main widened 3bp to 84.6bp while Xover widened 12bp to 444.5bp. The otherwise very busy primary market took a breather yesterday, although still alive as exemplified by Stora Enso issuing a two tranched green EUR benchmark deal where the 3Y maturity fixed at 4% while the 6Y segment fixed at 4.3%.
Sweden. Today the Swedish National Debt Office (SNDO) will present a new borrowing forecast. Central government budget outcomes for the three months since the latest borrowing forecast in February have surprised to the upside by some SEK30bn. We expect the Debt Office to adjust T-bill funding with corresponding amount but keeping bond issuance unchanged. The capital injection to Riksbank remains a clear upside risk to borrowing requirements later on, but as in February we expect the SNDO to leave it outside the forecast as the Riksbank have yet to specify the amount required. For a full preview, see Swedish Debt Office Preview, 17 May. We also get Statistics Sweden Labour Force Survey, which is likely to yet again show a very robust labour market following the PES data released earlier this month. We especially keep an eye on hours worked and how employment is developing.