Market movers today
It is major central bank week. On Wednesday, we expect the first unchanged decision from the Fed since January 2022, but it is not a done deal and markets are pricing a chance of another 25bp hike. An ECB hike of 25bp on Thursday is fully expected as well as a decision to end APP reinvestments, but we will get new staff projections and policy signals. We do expect Bank of Japan to tighten policy by easing its yield curve control during this year, but the meeting on Friday is likely too soon.
There are no major data releases from the large economies planned for today. In Denmark, we expect a sharp decline in inflation from 5.3% y/y in April to 3.0% y/y in May, mostly driven by electricity prices, see more below.
Through the remainder of the week, US CPI figures released tomorrow will be key information ahead of the FOMC meeting.
The 60 second overview
Trade: The global trade bellwether, South Korea, saw some improvement in exports in the first ten days of June, with an annual increase of 1.2%, for the first increase since February. Car and ship exports were the main drivers, whereas semiconductor sales continue on a weak note, with a 31% annual decline. US and EU shipments improved whereas sales to China continues to look fairly weak.
The Russian central bank kept rates unchanged at a meeting Friday and delivered a hawkish message as it considered hiking rates by 25-75bps. Consumer prices have shown signs of further acceleration recently after it slowed this year from a 20-year high in 2022. Russia is running a large public deficit, which could require tighter monetary policy, see Reuters.
Equities: Global equities marginally higher Friday in a quiet session where Japan stood out on the strong side while European stocks were lower. This is the trend we have seen for a couple of months, and we expect to continue as long as the macro momentum in Japan is so much stronger than in Europe. On the sector side, cyclicals/growth, consumer discretionary and tech led the gains while defensives were lower. In US equities mostly higher though with small caps lower: Dow +0.1%, S&P 500 +0.1%, Nasdaq +0.2% and Russell 2000 -0.8%. We see limited gains this morning in Asian and European futures ahead of the flood of monetary decisions that will dominate the week ahead of us.
FI: 10Y Global bond yields closed more or less unchanged on Friday, but the curves flattened as shown by the 2-10Y slope of both US Treasury curve and the German yield curve, that both flattened from the short-end although we are getting closer to the end of the hiking cycle of both Federal Reserve and ECB.
FX: The end to last week’s session was not least characterised by NOK strength following much-stronger-than-expected Norwegian inflation sending EUR/NOK below 11.60. Otherwise EUR/USD erased part of Thursday’s gains with the cross moving back to 1.0750 while EUR/GBP continues to set new lows (now at 0.8550).
Credit: Credit spreads barely moved on Friday where iTraxx Xover tightened 1.4bp (closing in 408bp) and Main tightened 0.1bp to close in 77bp.
Nordic macro
In Denmark, we get May inflation figures. We expect a very big decline in CPI inflation in May to 3.0% from 5.3% in April. Energy prices will be the key driver, as we are looking for a big decline in electricity prices. Also fuel prices have declined in May and German food prices suggest that also Danish prices have slowed. If we are right, this highly challenges our 5.1% headline inflation forecast for this year. With the May figures, Statistics Denmark registers a quarterly rent increase, which will be highly interesting as it also sets the tone for what we can expect of rents over the coming year.
