Market movers today
Focus to remain on risk sentiment after sharp moves in equities and currencies overnight. Today’s main calendar events are US ISM manufacturing and the Norwegian unemployment rate.
In the US, ISM manufacturing is expected to fall back slightly to 57.5, still indicating strong growth in the US economy. Trade tensions have yet to show a significant impact on the US economy, however early signs may have emerged already after the lower Apple sales estimates were attributed mainly to lower Chinese purchases.
In Norway, we expect the jobless rate to land at 4.0%; more on page 2.
We also get Danish FX reserves today, which may very well indicate an end to the 20-month streak with no intervention; more on page 2.
Tomorrow morning we will publish our updated view on the Nordic economies in our Nordic Outlook publication.
Selected market news
Risk was in another ‘off’ move overnight as equities went on the defensive and currencies experienced a ‘flash crash’ in JPY crosses. Throughout Wednesday, sentiment was weighed down by the dire Chinese PMI in the morning and mediocre European PMIs, but took a further significant hit as Apple issued a revenue warning last night, leading its stock to plummet in after-market trading. US equity futures weighed, with S&P futures down more than 1%; Asian indices were also markedly lower as notably Apple suppliers were sold off.
The bleak mood in stock markets – coupled with thin liquidity as the Japanese remain out for holidays – further helped to set off a 3.5% drop in notably AUD/JPY and a plunge in USD/JPY to below 105 (from around 109). The moves may have been exacerbated by FX algo trading amid meagre liquidity, and were later partly reversed with USD/JPY now trading around 107. US yields are still on the defensive and the ‘risk-off’ move led the 10Y towards 2.62%, close to 1Y lows. The price of crude oil bounced a tad yesterday after Saudi Arabia was said to rein in exports but it was dragged down with risk assets again overnight.
The moves overnight are clearly a testament to the fact that risk markets remain vulnerable due to a faltering global macro backdrop, and notably the global economic surprise index continues the deroute which started early in the autumn. Indeed, it is easy to eye the challenges for markets going into 2019: the trade dispute remains unresolved and China continues to lose momentum, Trump remains adamant on wall-building and the US government remains shut down, and in Europe populism is again on the rise ahead of the EU parliamentary elections and Brexit remains unsettled. Near term, the US ISM today and the jobs report tomorrow will be crucial in setting the scene for risk appetite among investors.
