Market movers today
Today’s highlight is the Fed minutes from the July meeting which will be particularly interesting ahead of the important September meeting where it is expected that Fed will give guidance on the new target.
In Euroland, we get the final inflation prints.
Virtual OPEC+ meeting begins.
Denmark to sell 2y and 10y bonds today.
The 60 second overview
Macro: The housing market fuelled by record low yields remains the bright spot in the US economy. Housing starts jumped 22.6% in July and housing applications increased 18.9% and the annual rate is now above the February level.
US politics: According to the Trump administration a small USD 500 billion stimulus package is currently on the table between the Republicans and the Democrats. A small package but it might give some relief that a deal can actually be struck.
US-China: Trump said last night that he personally called off the talks with China over the weekend. The move comes after Trump widened the attack on Huawei suppliers this week and it raises fears that the so-called phase-one deal could be cancelled. If that happens it could very well derail current positive market sentiment.
Equities: US equities performed once again as a new ‘lower yields’ rally pushed S&P500 to an all-time high. The strong housing data supported sentiment in housing related stocks. Furthermore, Home Depot surprised all analysts with a very strong sales announcement underlining that the pandemic and working-at-home policies are pushing customers to DIY stores. Home delivery is also popular and Amazon jumped more than 4% helping to push Nasdaq up 0.7%.
The positive sentiment has been carried over to Asia and Nikkei is up 0.4%. Equity futures also point to a positive opening both in Europa and later in the US.
FI: We saw a modest decline in bond yields yesterday and the US Treasury curve flattened from the long end. We saw the same tendency in our local Scandi markets. 10y yield spreads between the periphery and Germany were more or less unchanged and are still at a tight level and at or below pre-corona levels.
The Danish Debt Management office will tap in the 2Y and 10Y segment. We expect to see solid demand given the yield pick-up to matching German government bonds as well as better than expected Danish public finances.
The Danish mortgage refinancing auctions continue today with all mortgage banks selling bonds. So far, the mortgage auctions have been running smoothly with decent investor demand. We expect to see the same today.
FX: EUR/USD briefly broke through 1.1950 yesterday as the reflation/recovery story continued to set the tone in the market. GBP/USD edged higher to 1.325 and sterling has now erased 2020 losses against the dollar despite fears UK leaving the EU without a deal. Despite the positive risk sentiment JPY saw support and USD/JPY has been below 105.2 overnight. USD/JPY correlates at the moment closely with US yields. Meanwhile, Scandies struggled and EUR/NOK jumping above 10.55 as the market prepares for the Norges Bank meeting tomorrow.
Credit: Some slight weakness crept into credit markets during the afternoon, which took them slightly wider. iTraxx Main ended less than half a point wider and Xover slightly less than 1bp wider.
Nordic macro and markets
In Sweden, HOX Valueguard house prices released this morning recorded a 2.1% m/m s.a. rise in house prices in July. The y/y rate was 7.9%. Prices were up 4.7% over the last three months. Apartments rose 1.8% up 3.6% y/y. Like in the US, record low mortgage rates have fuelled a rally in the housing market despite the pandemic.
