Market movers today
The main focus today will be on the euro area March flash HICP figures. The preliminary data released for Germany and Spain points towards headline inflation cooling to 6.7% y/y, lower than initially estimated. That said, the ECB focuses on core inflation, which has likely remained elevated.
The US Private Consumption Expenditures will be released for February. Consensus expects Core PCE inflation to settle at +0.4% m/m, close to the core CPI released earlier (+0.45%). Real private consumption growth likely moderated after the January boost from warm weather faded.
In the evening, Fed’s Williams and Cook, as well as ECB’s Lagarde will be on the wires.
In the Nordics, we expect the Norwegian jobless rate to rise moderately to 1.8% (s.a.) in February. Also, Riksbank will publish the details for the first sale of government bonds taking place on Tuesday.
The 60 second overview
Fed’s weekly data showed that the use of the discount window declined to USD88.2bn (from USD110.2bn a week ago), while the use of the new Bank Term Funding Program (BTFP) increased to USD64.4bn (from 53.7bn). The combined use of the two emergency liquidity facilities continued the modest decline from the previous week, suggesting that the most acute risks could be contained for now. Similarly, the use of Fed’s USD swap lines and the FIMA repo facility remained near the previous week’s level, which means that foreign central banks’ demand for USD liquidity has remained stable. Easing stability risks could turn markets’ focus increasingly on the incoming macro data, which we think will likely support the case for a final Fed rate hike in May.
Also in the US, former President Trump has now been officially charged for crimes. The exact nature of charges is not yet known, but the case comes after a New York grand jury heard a witness give a statement on President Trump paying hush money to cover an alleged affair.
Finland is closing in on NATO membership after Turkey’s parliament overnight approved a bill that allows Finland to join NATO. All NATO member countries have now ratified Finland’s accession and it should only be a matter of days that Finland officially becomes a member. Sweden’s membership bid still awaits ratification by both Hungary and Turkey, and Turkey has repeatedly said that Sweden needs to take additional steps against supporters of Kurdish militants. As the issue is highly political, it is very difficult to give an estimated timeline for the process.
Equities: Global equities higher yesterday as macro data registered close to expectations and confidence crisis in banking slowly abating. It is fascinating how fast investors either forget or forgive. Last Friday the global financial market was dead-scared that Deutsche Bank was going to be restructured over the weekend but since then equities have been marching high. We argue this Friday will be very different to the last three Fridays when no one dared to buy banks ahead of the weekend. Yesterday, equities were lifted by the cyclical growth stocks, min vol underperforming and VIX moving yet another step lower. In US Dow +0.4%, S&P 500 +0.6%, Nasdaq +0.7% and Russell 2000 -0.2%.
Asian markets are higher this morning after another set of strong Chinese PMI data with the service sector showing very strong acceleration. US and European futures higher as well.
FI: European yields continue to rise despite the decline in headline inflation data from Germany and Spain, but core-inflation is sticky and remains high. Today, more preliminary inflation data from EU will be released, where headline inflation is expected to decline, but core inflation is likely to remain high. Given the comments from ECB officials it will support more rate hikes and upward pressure on the front of the yield curve as we saw yesterday. Even though 2Y German yields have risen some 35bp, there is still some 50bp left from the peak in early March.
FX: As we enter the final session of the quarter focus will not least turn to quarter-end flows and interests. Yesterday’s session was characterised by EUR/USD moving above 1.09 aided by broader risk sentiment and German core inflation data. The SEK continues to trade poorly while the NOK sell-off has eased slightly with oil moving higher.
Credit: Credit markets were broadly positive yesterday with iTraxx Main going 1.8bp tighter to 87.9bp while Xover tightened by 9.2bp to 452.9bp. In addition, the primary markets continue to be wide open with several financial and corporate issuers active with new deals across the Eurobond market. The current market sentiment is underpinned by a constructive interest also for the more leveraged share of the announced credit opportunities.
Nordic macro
Today, after market close (CET 16:20), the Riksbank will publish the details for the first sale of government bonds taking place on Tuesday. It is also the last day for a possible agreement in the Swedish wage negotiations.
Norwegian unemployment has remained surprisingly low despite leading indicators pointing to softer – albeit still strong – labour demand. We expect the jobless rate to rise moderately to 1.8% (s.a.) in February.
Ahead of the general election in Finland on Sunday, the three biggest parties, National Coalition (centre-right), Social democrats and the Finns party (right-wing), are running neck and neck. Different coalitions are possible, and forming a government may not be easy. A right-wing government is one of the options, potentially entailing significant cuts in government spending, even though campaigns have lacked details. Given the weak growth outlook, balancing public finances will be a challenge for any government composition.
