Market movers today
On the Swedish agenda we have retail sales for the month of April and NIER’s monthly economic tendency survey. For the latter, we expect a modest rebound, however from very low levels.
In Europe, we get DG ECFIN confidence indicators for May. Most confidence indicators released so far have increased slightly in May but remain at very low levels.
In the US, we get preliminary data for core capex orders in April, which most likely looked terrible like the rest of the economic indicators for April. US jobless claims will also be in focus.
We do not expect any rate changes from the Polish central bank, when they conclude their policy meeting today.
Otherwise, the focus is on politics, not least the negotiations on the EU recovery fund, which will now begin officially after the proposal released by the EU commission yesterday. Also keep an eye on the increasing US-China tensions and Brexit, where headlines are suggesting things are moving in the wrong direction.
Selected market news
Global risk sentiment and equity markets continue to be on a strong footing despite the tensions building between the US and China. Yesterday, the S&P 500 climbed to a 12- week high, while Asian stock markets are also seeing solid gains this morning. US and European futures are pointing to increases in their upcoming sessions. Bolstering the positive sentiment is a sense that the opening up of the global economy is proceeding well without seeing a major resurgence in new virus waves and economic activity is fast catching up. Yesterday, Australian central bank governor Phillip Lowe said that the Australian economy was recovering better than expected, tracking between the bank’s baseline and upside scenario outlined this month, but also warned about scaling back fiscal and monetary support prematurely.
Furthermore, policymakers continue to take steps to aid the economy. Yesterday, the EC commission announced its plan on a European recovery fund. In general the proposal exceeded market expectations as it envisages EUR250bn in loans on top of EUR500bn in grants, which were originally included in the German-Franco proposal last week. For more details see our take in Flash comment – Next Generation EU: A landmark for European history? Overall, we believe the recovery fund proposal is a strong signal from the Commission and European leaders (if confirmed) of support for the European project. While the exact value of the grants is still difficult to assess (due to the repayment schedule being unknown), we remain cautiously optimistic on the periphery.
So far investors haven’t been frightened by the growing tensions between China and the US. Yesterday, the US Secretary of State said that the Trump administration could no longer certify Hong Kong’s political autonomy from China. This could open the door to options including visa restrictions, asset freezes and potential tariffs. The National People’s Congress in China is expected to pass the measure today according to Bloomberg news. The offshore yuan tested a record low yesterday amid fears of US actions
