Market movers today
Today is a slow day on the data front. We get the final April HICP figures from the euro area. The inflation data will be scrutinised to measure the strength of the underlying price pressure and the contribution from services and goods, respectively.
We will also be listening in to Riksbank’s Flodén’s thoughts on inflation, see more below.
G7 leaders will meet for a summit in Hiroshima, Japan, from Friday to Sunday with Russia and China being high on the agenda.
Friday, which is a bank holiday in Denmark, we expect a further increase in Japanese CPI inflation in April. Friday we also have Fed’s Williams and Bowman speaking.
The 60 second overview
Japan’s GDP for Q1 surprised to the upside rising 1.6% q/q annualised versus consensus expectations of 0.8% q/q annualised. The increase was driven by stronger consumption and rebounding tourism. It added to the strength in Japanese equities while it had limited effect on USD/JPY.
US debt ceiling talks progress with Republican speaker of the House, Kevin McCarthy saying it would be possible to reach a deal by the end of the week while also warning that there was still a lot of work to do. President Joe Biden will cut short a foreign trip coming back on Sunday from G7 meetings in Japan, thus scrapping visits to Papa New Guinea and Australia.
US retail sales beat expectations yesterday with core sales (the so-called control group) rising 0.7% m/m in April (consensus 0.4% m/m), while being revised slightly lower in March to -0.4% m/m from -0.3% m/m. 2-year treasury yields rose 13bp in response. Fed speakers continue to be tilted towards the hawkish side relative to market pricing with several speakers yesterday suggesting a further hike in June is still possible and that it is premature to talk about rate cuts. Despite the repricing yesterday, the market still prices 60bp of cuts by year end.
Equities: Global equities lower yesterday dragged down by Europe and US. It looks very much like investors have started the waiting game of the debt ceiling deadline and no big investment decision will be taken ahead of a deal. Looking at rotations it does not suggest any signs yet of big worries ahead of the x-day which Yellen repeated yesterday could be 1 June. Cyclical growth outperformed yesterday and this has been the trend since the middle of the earnings season. Again, no major rotation is taking place and the VIX in hovering around well below 20. In US equities closed lower with Dow -1.0%, S&P 500 -0.6%, Nasdaq -0.2% and Russell 2000 -1.4%. Asian markets are mixed this morning. However, it is interesting to note the remarkable continuation of Japanese outperformance. US futures are a tad higher this morning while European futures are a tad lower.
FI: The 5-10y point led the sell-off of 5bp yesterday as issuance picks up and stronger than expected US retail sales initiated the sell-off.
FX: Yesterday was characterised by USD strength across the board in a risk-off environment. EUR/USD still trading below the 1.09-mark. Rising US yields driven by relatively upbeat US data took USD/JPY well above 136. Scandies weakened against the EUR. EUR/NOK rose above 11.60, while EUR/SEK is hovering around 11.30. EUR/GBP is around the 0.87-mark.
Credit: Yesterday, credit markets were relatively calm and traded unchanged to slightly wider with CDS indices closing with iTraxx Main (unch.) at 86.3bp, and iTraxx Crossover (+2.3bp) at 451.3bp. The primary Eurobond market is continuing the busy pace with several borrowers raising debt where Lifco AB, KfW, Volvo, BNP Paribas Home Loan SFH, Arion Banki and Jyske Realkredit were among the announced deals.
Nordic macro
Riksbank Deputy Governor Martin Flodén attends a seminar about global perspectives on inflation and the post-Covid recovery. The seminar starts at 11.30 CET. Note that the Swedish bond market closes at 12.00 CET today.
