Market movers today – Brexit talks in focus
The Brexit talks resume today between the UK and the EU. Both Boris Johnsona and top negotiator Davis wil be attending a dinner with EU’s Michael Barnier.
US housing starts in focus after the very strong NAHB index yesterday.
OPEC+ is set for a virtual meeting tomorrow, so keep an eye on the usual press interviews ahead of the meeting.
The 60 second overview – global yields move lower and Nasdaq hits an all-time high
Macro: The US homebuilder sentiment indicator NAHB jumped a stunning 6 points to 78 (estimated 74) in August – the highest level since 1998 and matching the all-time record. It shows how the record low yields have spurred demand for new homes despite the COVID19 pandemic.
However, the manufacturing sector is still struggling and the New York manufacturing index (empire state) disappointed in August. It dropped to 3.7 in August from 17.2 in July ( consensus 15) – about 30% of the respondents said that activity was declining. The recovery in the US economy now seems more ‘gradual’ as the new wave of corona is weighing on growth.
US politics: The Democrats opened their virtual convention last night and unsurprisingly notably Michelle Obama attacked Trump for his handling of the pandemic. The Republican Party will have its convention next week and with focus on this, the chances of agreeing on stimulus package through Congress before the end of September are diminishing day by day.
The US political deadlock could potentially become a new major market theme over the next couple of weeks.
Covid19: The number of global cases now top 21.8 million and more countries like major tourist countries like Spain, Italy and Greece close down or restrict nightlife. Number of cases continue to grow in South Korea and Hong Kong. In the US it seems that the number of new cases are rising at a slower pace compared to last week. For more see COVID19 Update – Second waves in slow motion, August 17.
Equities: US equities performed once again as a ‘lower yields’ rally in tech stocks propelled the market higher. The Nasdaq index closed at an all-time high up 1% driven by FANG+ stocks including Nvidia and Tesla that both soared to new highs.
Oracle has now entered the bidding war over US arm of TikTok. Trumps expands his curb on Huawei targeting Huawei affiliates.
FI: Part of the move higher in yields last week reversed yesterday and 10Y US Treasury and 10Y Bund yield fell 3-4bps. The 10Y segment drove the move on both US and the European curves and we saw a bullish steepening of the 10s30s curve especially in the US. The US 10s30s curve is now 18bp steeper at 74bp compared to the level Monday last week.
Periphery bond markets notably Spain tightened versus Germany. The EGB performance comes despite the ECB is still buying below “average” in the PEPP programme (weekly data out yesterday). PEEP and PSPP purchases remain a dominating factor in the EGB market.
FX: The US-dollar remains under pressure. EUR/USD have edged higher over night and trades just below the 1.19 level – the highest level since May 2018. USD/JPY continues to move in tandem with US yields and it has traded below 105.5 overnight.
In a relatively quiet Scandi session EUR/NOK was little changed whereas EUR/SEK edged above 10.30. Next important Scandi event is the Norges Bank meeting on Thursday, though we do expect any surprises here.
Credit: Credit markets in Europe staged an afternoon comeback after widening during the first part of the day. Thus, iTraxx Main ended the day almost 1bp tighter at 54 and Xover tightened 5bp to 339. The primary EUR market is still in holiday mode. Bloomberg reports that US Corporate IG 2019 issuance reached a record USD 1.346 trillion on Monday surpassing the 2017 full year IG issuance.
Nordic macro and markets – NIER survey in Sweden
In Sweden, NIER will present the result of their latest biweekly extraordinary business survey, conducted in order to estimate the impact of Covid-19 on the Swedish private sector. The last surveys have pointed at a gradual, albeit slow, improvement of business conditions and we expect something similar this time around.
The Riksbank is set to buy a maximum of SEK3bn worth of municipal bonds (Kommuninvest) today as part of their QE programme.
