Market movers today
In the US we get the NFIB small business optimism index for April, which is likely to have fallen sharply. US CPI inflation for the month of April is also due for release. Headline CPI is expected to have declined sharply from 1.5% y/y to 0.4% y/y on the back of lower gasoline prices and a drop in core CPI to 1.7% y/y from 2.1% y/y in March.
Three Fed speakers are scheduled to talk today (Bullard, Harker and Mester), providing more insight in the Fed’s thinking at the moment.
Today Norway releases the weekly unemployment data, which we believe is the most up to date signal of the economy.
Final GDP for Q1 as well as revised 2020 budget are also due in Norway (see more on page 2).
Selected market news
Yesterday, Saudi Arabia in a surprise move announced that it will trim oil production another 1mb/d from June, which will leave Saudi oil production at 7.5mb/d, down around 25% compared to February production. The Emirates and Kuwait announced that they would do smaller reductions as well. The move did little to support the oil price and after a brief spike above USD31 a barrel for Brent yesterday afternoon, the price is back below USD30 a barrel this morning.
Despite the helping hand from Saudi Arabia energy stocks in the SP 500 index dropped 1.7% in yesterday’s session, where health care and IT stocks once again were the winners. The S&P index ended flat, whereas Nasdaq ended up 0.9%. Dow Jones was down 0.5%. The overall negative sentiment was carried over to Asia with both Hang Seng and Nikkei in red. European and US equity futures are also in red this morning. The negative sentiment in Asia was fuelled by a report that China has imposed a ban on Australian meat from four slaughterhouses.
The US curve 2s10s continued to steepen yesterday to above 54bp, as the market has to absorb not just treasury supply but also a growing long-end supply from various Investment Grade issuers like Disney. However, overnight the sour risk sentiment has lent support to treasuries and the curve has flattened slightly again. Note that the Fed today will start buying ETFs invested in corporate debt.
The German Supreme Court ruling last week that the PSPP programme from the ECB could be unconstitutional continues to set the agenda in the European bond markets. Yesterday, Finnish ECB member Olli Rehn warned that the ruling could have a far-reaching impact on the ECB’s ability to fulfil its mandate and that the ruling is interfering with the independence of the ECB. According to Bloomberg Merkel is trying to smooth things over, saying that the ECB could explain the programme to the Bundesbank that then could work as an intermediary to the German Parliament.
Yesterday, UK PM Johnson partly backtracked on his Sunday speech where he said people ‘that cannot work from home should go to work’. He now underlines that people should only go back to work if the workplace is COVID-19 secure.
