Market movers today
There are no major events for the market today, so focus is once again on any news from the new US administration.
The market will also scrutinize any polls from France that could give an idea of whether Marine le Pen has gained following the Francois Fillon scandal. Greece is also back in the limelight after the harsh comments by the IMF earlier in the week.
Oil prices have been under pressure this week and today’s weekly oil stock numbers from the DOE will be scrutinized.
Selected market news
The sentiment in financial markets and especially in the European government bond market improved yesterday after the strong sell-off on Monday. The battered French bond market saw a small spread tightening to Germany for a change. It seems that despite the recent focus on Republican candidate Francois Fillon and his derailed campaign, he is still not out of the race and, importantly, the polls are still pointing to a significant lead for both Emmanuel Macron and Fillon versus Le Pen in a possible second round in the French presidential election.
A daily poll by the pollster Ifop showed that Le Pen’s lead in the first round had increased to 26% of support, that Macron is at 21% and that Fillon is now steady at 18.5%. However, importantly, the poll also showed that in the second round, Macron is forecast to get 64% versus 36% for Le Pen. Hence, the probability of Le Pen actually becoming President is still relatively low, according to the polls.
Greece has also attracted attention this week after the IMF earlier this week said the surplus targets are unrealistic and that Greece needs more substantial debt relief. Yesterday, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, said that the EU disagrees and that the IMF has an outdated view of the Greek economy and that it ‘must be honest’ in its assessments. The IMF’s comments and its disagreement with the EU weighed heavily on Greek short-term debt, and the 2Y Greek benchmark bond yesterday rose 66bp to 9.2%.
Dow Jones touched an all-time high yesterday evening as the market was expecting news from the Trump administration on tax cuts and fiscal spending. However, nothing was revealed and as oil prices dropped for a second day, sentiment turned and the major indices ended the day more or less unchanged.
The lower oil price and a ‘Trump reflation’ case running a bit out of steam, coupled with disappointing consumer credit data and dovish comments from the Fed’s Kashkari (voting member) supported US treasuries, and 10Y yields dropped below 2.40% for the first time since mid-January. After the lower wage growth in the labour market data released on Friday, we have become even more convinced that the FOMC will leave rates unchanged at the March Fed meeting. In the currency market, the sterling once again attracted attention as two Bank of England members called for a rate hike as early as March. It supported the otherwise battered pound.
