Market movers today
The ECB’s Bank Lending Survey is due for release. The latestreport from January showed that loan growth continued to be supported by increasing demand across all loan categories, while creditst andards (i.e. banks’ internal guidelines or loan approval criteria) for loans to enterprises tightened somewhatin net terms due to banks’ lower willingness to tolerate risk.
Rate decision in Hungary. We expect the National Bank of Hungary (NBH) to keep its base rate unchanged at 0.9% today. The inflation rate rose to 2.9% y/y in February, near the central bank target of 3%. However, the rise in inflation so far is driven mainly by a base effect of energy prices, and thus no imminent pressure for higher interestrates.
In the US, Conference Board for April is due. The indicator is at very high levels and although we do notexpect to see a significant decline, we would also not be surprised to see a small decline given the historically high levels. In general, we have seen a divergence between ‘hard’ and ‘soft ‘ data in recent months, when soft data has been strong and hard data weak. Softdata indicates growth in the region of 1.5-2.0%, while the Fed At lanta GDP nowcastshows growth in Q1 of 0.5% q/q AR.
In Sweden, unemployment figures are due . For more on the Scandi region, see p.2.
Selected market news
The very strong risk relief rally in Europe yesterday post the firstround of the French presidential election continued in the US session with Dow Jones and S&P500 closing 1% higher, and markets in Asia are also trading higher this morning. In fixed income markets, yields on German government bonds rose some 9-11bp across the curve while the 5Y OAT -Bund spread tightened 25bp and is now back at a level last observed at the end of last year, meaning any French political risk premium is gone.
The election outcome was in line with prior opinion polls, and yesterday’s strong risk rally could indicate thatinvestors were caught on the wrong foot and/or markets now see Macron winning the presidency as a done deal. New polls released yesterday confirmed a solid 60% to 40% lead for Macron versus Le Pen in the second run-off on 7 May, and comments in the media also suggest that most political commentators see Macron winning in the second round.
However, while the risk rally could continue in the coming days, we still see a risk of volatility rising again driven by profit taking and risk reduction going into the second round on 7 May. Moreover, our equity strategy team still holds the view thatequity markets will soon be back focusing on growth.
With political uncertainty related to the French presidential election cleared (for now at least ), focus is likely to turn to the US, where President Trump has announced that he will present his tax plans on Wednesday. According to the media, Trump will call for cutting taxes for individuals and lowering the corporate rate to 15%. Moreover, the Trump administration yesterday said it will impose new tariffs on imports of Canadian softwood lumber. This marks the latestexample of the new administration taking a tougher stance on trade practices that the US considers unfair. Last and not least , the mostrecent government funding bill expires on Friday 28 April. If both chambers fail to approve a new funding bill before midnight on Friday 28 April, the government would run out of money to pay its bill and a shutdown would begin.
