Market movers today
After the sharp risk sell-off following the release of the December FOMC minutes, focus is on whether sentiment rebounds or stays shaky.
Today’s key release is the US jobs report due out 14:30 CET. ADP was much stronger than consensus for today’s jobs report but ADP is not considered a good indicator for official jobs growth. That said, if jobs growth in December was indeed above 800,000, it increases the probability of the Fed hiking already in March and tightening more in 2022 than currently priced in, so risk may not react positively to a strong number this time around. Also look out for whether the labour force increases, as a rebound in the labour force is likely needed for stronger jobs growth in 2022.
In the euro area Flash HICP figures for December are due. We expect a slight easing of the inflation pressures to 4.7%, but upside risks stem from the energy component and another uptick in German and Italian core inflation. Also euro area retail sales data for November are due out at 11:00 CET.
In Germany, industrial production data for November is due out, which is interesting because of the sharp decline in factory orders. Norwegian industrial production is also due out.
The 60 second overview
Inflation: German inflation increased further to 5.3% in December, the highest since 1992. Energy prices and VAT-normalisation are still key drivers but state figures indicate core inflation has also been increasing. We are still waiting for higher gas prices to feed through, which will likely be a January effect, so more headwinds could be in store for the German consumer, although the VAT base effect will slide out of the inflation measure in 2022. Italian inflation also climbed to 3.9%, which is the highest level since 2008.
Headwinds for the Japanese consumer: We got some weak figures out on Japanese consumers this morning with household spending down 1.2% in November (vs. consensus of 1.2% increase) and real wages down 1.6% yoy as total cash earnings ticked in at 0% yoy. The weak JPY is slowly starting to raise some concern among politicians as consumers’ purchasing power is currently being eroded. Finance Minister Suzuki was out this morning saying FX stability is important. We will watch for further comments on JPY ahead of the 17/18 January Bank of Japan meeting.
Equities: Equities fell yesterday but sector/style rotation remains the big story with 10%-point performance difference between energy and tech in 2022. Sentiment a bit better yesterday but yields continued higher and hence the defensive value trade turned into a more cyclical value trade. In US, Dow -0.5%, S&P 500 -0.1%, Nasdaq +0.1% and Russell 2000 +0.6%. Sentiment in Asia this morning with Hang Seng leading the gains. Futures in Europe and US in small gains.
FI: Bond markets came under pressure yesterday as the hawkish Fed minutes from the December meeting were digested. The 10y Bund touched above -0.05%, but later reversed to end the day just 2bp higher than it started.
FX: Yesterday, EUR/USD ended the day marginally below 1.13 at the time of writing. EUR/GBP began the day by moving higher but ended around the same level, where it started. Both EUR/NOK and EUR/SEK rose and were trading at 10.05 and 10.33, respectively, at the time of writing. Downwards pressure on EUR/DKK eased this week.
Credit: CDS indices came under pressure yesterday, with iTraxx Xover widening 7.5bp (taking it above 250bp) and Main 1.5bp (to almost 50bp). Cash bonds held up better with HY closing unchanged and IG widening 0.5bp.
Nordic macro
There are no market movers in the Nordics today.
