Market movers today
In the US, today’s highlight is the first Presidential debate. According to the polls, Democratic opponent Joe Biden remains the favourite to win the race, see US Election Monitor: Democrats are slight favourites to secure the Senate, 25 September.
German and Spanish CPI figures for September are set to give clues where the euro area HICP print is headed on Friday, while the EU Commission’s economic sentiment indicator is set to show how the European recovery has fared in September.
In Sweden and Denmark business confidence for September is due out. Riksbank Governor Stefan Ingves will hold a speech about the economy and monetary policy at 9:00 CEST.
Speeches by Fed’s Williams, Harker and Quarles (all voters) will round off the day.
Brexit negotiations are set to resume today in Brussels. While we do not expect a major breakthrough this week, the two sides may fast-track negotiations ahead of the EU summit on 15-16 October, if they are getting closer to common understanding.
The 60 second overview
US politics. Yesterday, we heard more positive tones from Democratic House Speaker Nancy Pelosi, who said that she has spoken with US Treasury Mnuchin on another relief package and that she expects talks to continue. With the Democrats lowering their demands, she argues that it is the White House and the Republicans turn to follow suit by accepting a larger stimulus package. While an agreement still seems at least somewhat down the road (the White House and Pelosi are still around USD1,000bn apart), risk sentiment got a boost yesterday afternoon from Pelosi’s comments. As we argued in yesterday’s morning comment, if the two parties can agree on more fiscal stimulus, it may be the trigger for shifting the recent risk headwind to tailwind.
Equities. The global equity markets ended higher yesterday and we have seen a modest rise across Asian equity markets this morning. The move is driven by expectations of more fiscal stimulus as well as monetary stimulus from the US.
FI. The traditional impact of yesterday’s risk-on mode in rates markets were higher rates across the board and tighter spreads, with steeper curves, in the morning. However, with an afternoon session that reverted this EGB rates ended broadly unchanged on the day as a whole. 10y Bund ASW-spread widened 0.5bp to 31.4bp, a pattern seen in past two weeks.
FX. The global risk rally yesterday helped lift both EUR/USD and the Scandies, while USD strength abated somewhat. Sterling recovered early in the day but later reversed gains partially. CEE currencies continue to be under pressure versus EUR though.
Credit. While credit market sentiment improved yesterday with iTraxx Xover and Main tightening 18bp and 2bp, respectively, cash bonds only tightened marginally and the improved backdrop was insufficient to lure any issuers of EUR benchmark transactions.
Nordic macro and markets
In Sweden, the day kicks off with a speech by Stefan Ingves at 09:00 CEST about the economy and monetary policy. Before the Minutes are released on Thursday, we expect him to just reiterate the message from the press conference last week. Also at 09:00 the NIER business confidence survey is published. So far, the message has been that ‘things are improving but are still far from normal’. To the extent recent softer European services data can be traced to accelerating infection rates, Swedish services industries should be in a better place considering that infection rates so far have remained relatively stable and low. Equally we see no particular reason to expect more pessimism from manufacturers. Having said this, we believe that the verbal description of business conditions as expressed in the report is more informative than the exact numbers.
