Market movers today
The most important data release of the day will be the US August CPI.
In the euro area, we receive industrial production figures for July. The industry has suffered the whole year and recent business surveys suggest that the suffering only got worse in July.
In the UK, the monthly GDP estimate is due for release for July.
The 60 second overview
Markets. US stocks faced a decline, while oil prices reached their highest levels in 2023. The S&P 500 slipped by 0.6%, primarily due to declines in tech giants such as Apple, despite gains in oil and gas companies. Additionally, the Nasdaq Composite saw a 1% decline. The pan-European Stoxx 600 index concluded the day with a 0.2% dip, revealing a mixed performance across sectors and major bourses. Notably, chemicals stocks experienced a 1.5% decline, leading the losses, while autos and telecoms stocks exhibited a 0.7% rise. 2-year US Treasury yields stayed firm above 5%, while the USD traded in narrow ranges. Brent crude rose by 1.8% and is now above USD 92 per barrel, which is the highest level since November 2022. This morning, Asian markets are in negative territory across the board.
We expect headline US CPI growth to pick up to +0.5% m/m (3.6% y/y) largely due to higher energy prices, but forecast core CPI growth remaining low at only +0.2% m/m (4.3% y/y). Slowing nominal wage growth continues to ease price pressures on the broader core services sector, while past slowdown in rent growth continues to feed into slower shelter inflation. While the Fed is widely expected to stay on hold at next week’s meeting, another low print could ease the pressures to keep hiking in the later November and December meetings.
UK labour market report for July/August was broadly in line with expectations. The unemployment rate increased to 4.3% (up from 4.2%). Average wage growth excl. bonuses were relatively steady at 7.83% (from 7.79%) with wage growth incl. bonuses increasing to 8.5% due to NHS and Civil Service one-off payments made in June and July 2023. Private sector pay growth slowed marginally suggesting a peak might be near.
German ZEW expectations surprised with an increase in September to -11.4 (prior: -12.3, cons: -15.0). The assessment of the current economic situation fell to -79.4 from -71.3 in August. Although expectations improved slightly, ZEW signals further declines in PMI ahead and increasing recession risk with the average ZEW value at the lowest level since the pandemic.
Equities: Global equities were lower yesterday and basically reversing the Monday moves. Energy sector was lifted by a higher oil price while banks were doing good on a higher-for-longer push. As tech was the worst performing sector it resulted in a quite visible value outperformance yesterday. In US Dow -0.1%, S&P 500 -0.6%, Nasdaq -1.0% and Russell 2000 +0.01%. Asian markets are broadly lower this morning and European futures down half a percent. US futures are a tad lower.
FI: Yesterday’s trading session was mostly a waiting game ahead of today’s US CPI and tomorrow’s ECB meeting. EGB yields were virtually unchanged on the day in the 10y point as were the intra-euro area spreads. Curves flattened marginally. Today’s highlight is the US CPI, which points to 0.5-0.6m/m.
FX: EUR/USD remains around the 1.0750 mark. USD/JPY is trending up again after Ueda’s hawkish comments earlier this week, trading around the 147 mark. EUR/GBP rose above the 0.86 mark. EUR/SEK trades above 11.90, while EUR/NOK is hovering around 11.50.
Credit: Credit markets were a little soft yesterday, iTraxx Main went 1.3bp wider to 71.5bp while iTraxx Crossover went 4.2bp wider to 399.1bp. The new issue activity across the Nordic market remains busy demonstrated by deals from Stolt-Nielsen in NOK, New Lansforsakringar Bank and Nordic Investment Bank in SEK, Borgo AB tap in SEK, and Arbejdernes Landsbank in DKK. On a broader primary note, Bloomberg reports of good investor appetite underpinned by sizeable spread compression and oversubscribed book coverage.
