Market movers today
Another very quiet day on the macro data front, no key releases or central bank speeches are scheduled for today.
The 60 second overview
China: The Chinese economy fell into deflation in July, where CPI dropped 0.3% y/y. Consensus expected this outcome, but it is still a striking development. It is rare that consumer prices decline in China. It happened global crises in 2020 and 2009. It also comes at a time when many other large countries are still battling high inflation. Finally, the price decline in China happened despite the 6% drop in the effective exchange rate the past year.
Japan: M3 money supply growth slowed in Japan to 1.9% in July and fell below the pre-pandemic growth rate. It may suggest that inflationary pressures from monetary policy are not that strong in Japan, but there is likely still an excess supply of money from the big increase in 2020-2021 making its way through the economy, which creates demand and puts upwards pressure on price increases.
Equities: Global equities fell yesterday across regions, though with Japan as the exemption. Lots of action taking place in Europe where banks sold off, driven by Italian banks as the government decided to go on with windfall tax for the sector. A rather special day in global health care with big news from two of the world’s leading pharma companies, Eli and Novo. Eli lifting their guidance while test data for Novo (Wegovy) study showed superior results. With the two heavy-weight companies rising 15% and 17% respectively, it was enough to secure a strong outperformance for the health care sector globally.
In US -0.5%, S&P 500 -0.4%, Nasdaq -0.8% and Russell 2000 -0.6%. Asian markets are very mixed this morning. European futures indicating a rebound today while US futures are flat.
FI: A strong rally in global yields led by the long end dominated yesterday. 30y German bonds declined 14bp on the day, while the 2y declined just 5bp. Risks to the Chinese property market and a new bank tax in Italy are among the drivers. ECB’s consumer expectations survey pointed to lower inflation expectations in June, which may also have supported the EGBs.
FX: Muted reactions in FX space on the back of China’s deflation numbers this morning. The USD has retained its gains vs EUR and JPY with EUR/USD around 1.0960 and USD/JPY still above 143. The Scandies were hit by risk off yesterday. EUR/SEK, popped some ten figures higher, now at 11.73. The NOK has erased some of the losses, EUR/NOK now at 11.25.
Credit: Yesterday credit markets followed equities into risk-off mode. Itraxx Main widened 2.1bp to close at 73.3bp, while Itraxx Crossover widened 9.9bp to close at 409.1bp. Primary market activity continued to be very limited.
