Market movers today
Focus continues to be on the spreading of COVID-19 in the US and its impact on risk sentiment. In the US, we also focus on the PCE consumption and notably focus on the strength of the rebound after two consecutive months of decline. Retail sales point to a solid rebound.
In the euro area the ECB will publish its loan data for May. We look for another increase, albeit lower than previous months’. ECB’s Lagarde speaks at 9:30 CEST today, but we doubt new messages will come through.
On Sunday, the first round of the presidential election is held in Poland; more in FX section (p. 2).
In the Scandies, retail sales are due out of Norway and Sweden alike (see p. 2). Further, Finland up for review by Fitch.
Selected market news
Market sentiment remains somewhat uneven. Equities staged a decent comeback in the US yesterday after a dire Wednesday session. Major US indices gained more than 1% on the day with notably financials higher on signs of easing regulation. China closed but Japan also staged decent gains with Nikkei up close to 1.3% at the time of writing. Oil prices recovered somewhat with Brent crude trading above USD41/bbl yet again. US Treasuries saw slightly diverse moves: the 10Y yield was a tad up on the day and a small steepening of the curve was seen. Credit indices also mixed in both Europe and the US. Dollar strength eased a bit; EUR/USD back above 1.12.
US COVID-19 cases reached a new daily high yesterday when surpassing April highs as several states are now haunted by second virus waves. The latest development leaves a rising risk that several US states may be forced to take new lockdown measures sooner or later. Notably, Texas and Florida halted re-openings yesterday. Europe still seems to have the virus broadly under control but also battles new local outbreaks. Meanwhile, the situation in EM/developing countries is still quite bad.
ECB minutes from the June meeting released yesterday were overall balanced. Indeed, the minutes contained both hawkish and dovish elements. The ECB stands ready to adjust all instruments but wants more data before any possible next move, which means we should not expect news on this until September at the earliest. A key thing to note is that the EUR1350bn PEPP was referred to as a ‘ceiling’ for the first time. Further, the need for ‘proportionality’ with regard to the PEPP scheme was noted and two reasons mentioned for its increase – likely to withstand potential criticism of purchases from notably the German Constitutional Court: (i) the significant downward revision of inflation outlook, and (ii) tighter financial conditions than prior to the COVID-19 shock.
