Market movers today
Markets remain in waiting mode ahead of the ECB meeting and US CPI data later this week. Today, the German ZEW index will provide early hints about how the largest European economy has developed in September, consensus is looking for weakening sentiment following a downbeat reading in the Sentix indicator last week.
In the US, NFIB Small Business Optimism index will be released. While companies reported slightly more positive outlooks over summer, consensus is looking for a modest setback in August.
The 60 second overview
Markets. In the US stock markets saw an upturn, driven by Tesla’s substantial gains and a broader rally in large-cap tech stocks. The S&P500 increased by 0.7%, while the Nasdaq Composite, focusing on technology stocks, gained 1.1%. Tesla’s stock surged by 10.4% following optimism from Morgan Stanley analysts who suggested that the company’s supercomputer Dojo could significantly enhance its value by opening new markets. In Europe, natural gas futures surged by 5.5% due to ongoing strikes at a liquefied natural gas production site in Australia, posing a threat to global supplies. Amidst these developments, Europe’s Stoxx 600 index registered a 0.3% gain, primarily driven by positive sentiment from Asia. Elsewhere, the USD fell by the most in two months as both China and Japan took steps to bolster their currencies, while Brent crude oil reached 2023 highs around USD 91 per barrel. This morning, Asian markets are mixed. Futures point to a positive open in Europe.
The US House of Representatives returns from summer break today and will have a busy schedule for the coming weeks, as Congress needs to pass a new funding bill by 30 September to avoid a government shutdown. A shutdown, while not as serious as a default, could still lead to federal workers missing salaries and there may be disruptions to public services. Over summer, Democratic Senate Majority Leader Schumer and Republican House Speaker McCarthy struck a preliminary deal on a short-term funding measure known as ‘continuing resolution’ aimed at buying time for more thorough budget negotiations later on. But the measure still needs to pass through the House, and McCarthy is once again facing opposition from hardliner Republicans, who demand new spending cuts as well as progress on an attempt to impeach President Biden in return for support. House Democrats and moderate Republicans do have the combined votes to pass the bill without the hardliners, so for now we think a shutdown remains unlikely. But Republicans could still attempt to push for some spending cuts such as delaying new support measures for Ukraine. As usual, the negotiations often tend to go down to the wire, but they should have limited impact on financial markets.
Equities: Global equities were higher yesterday, driven by cyclical growth stocks while energy was the only sector that was lower. Tesla – the second biggest consumer discretionary company in the world – was upgraded at Morgan Stanley and drove a substantial outperformance of the sector yesterday. In US Dow +0.3%, S&P500 +0.7%, Nasdaq +1.1% and Russell 2000 +0.2%. The positive tone from Wall Street has carried over to Asia this morning with most markets being higher. Japanese stocks are leading the way higher and bond vol has come down just one day after the hawkish tone from Ueda. European futures are in green this morning while US futures are in red.
FI: There was a modest rise in European government bond yields across the curve, which was driven partly by the negative sentiment in the Japanese government bond market, where yields rose on the back of comments from Bank of Japan hinting towards the end of negative policy rate. Furthermore, the issuance in the primary market continues with plenty of syndicated deals.
FX: EUR/USD is trading in around the 1.0750 mark as the USD weakened across the board in yesterday’s session. In contrast, the JPY strengthened the most in the G10 space on the back of hawkish BoJ comments, sending USD/JPY down to around 146.5. EUR/GBP is still just short of the 0.86 mark. EUR/SEK remains around 11.90, while EUR/NOK is hovering around 11.45.
Credit: Mirroring the overall positive tone yesterday, the credit markets continued to see tightening in CDS indices. iTraxx Main closed the day 0.9bp lower at 70.21p, while iTraxx Xover was 4.2bp lower at 395bp. The primary market appears to be frontloaded ahead of this week’s US CPI report for August and ECB’s rate decision. The constructive tone continued with several corporates and financials announcing debt offerings.
Nordic macro
In Norway, we expect mainland GDP dropped 0.1 % m/m in July after zero growth in Q2. If so, the figure will confirm that growth is slowing down in line with expectations and support our view that the September hike will be the last in this cycle.
