Market movers today
The implications for Trump’s presidential campaign and policymaking more widely will be in focus after he tested positive for COVID-19.
In Europe, focus today will be on the September flash HICP figures, the last to be released before the October ECB meeting. Country data points to a continued weakening of underlying inflation pressures and we would not be surprised to see a further deterioration from August’s low core inflation print of 0.4%, with overall headline inflation remaining in deflationary territory for a second consecutive month.
The US jobs report for September is due out today. Non-farm payrolls are likely to increase for a fifth straight month, with a continuation of the +1m trend. The ADP private employment report released earlier this week also suggested continued improvement in the US labour market.
The EU summit continues in Brussels, with Brexit, Turkey tensions and rule of law issues among the topics to be discussed by EU leaders.
In Norway, we expect the unemployment rate to have dropped to 3.9% in September, while Danish FX reserve figures for September round off the day.
The 60 second overview
Macro. This morning it was revealed that US President Trump and the first lady tested positive for COVID-19. He stated that he will go into quarantine. The big question is how ill he will become and to what extent it will affect his campaigning efforts for the US presidential election. Another question is whether other members of his administration have been infected. The uncertainty is hurting risk sentiment and thereby equities and Scandi currencies, where NOK suffers the most.
US fiscal support package. While the Democrats managed to pass their USD2.2trn fiscal package in the House of Representatives, they failed to find bi-partisan support from the Republicans and the Trump administration, who are pressing for a smaller package of USD1.6trn. Negotiations between House speaker Nancy Pelosi and Treasury secretary Steven Munchin will continue. The passing of new fiscal stimulus is critical to continue the support for the unemployed and keeping the US recovery afloat. US equity futures declined on the failure to reach a bi-partisan agreement.
EU sanctions on Belarus. After Cyprus dropped its opposition, the EU yesterday passed new sanctions against Belarus as a result of the disputed election in the country on 9 August. The sanctions are due to take the form of asset freezes and travel bans against around 40 Belarusian officials implicated in alleged fraud in the election and in a post-ballot crackdown on domestic protesters. The tougher EU stance on Belarus may spill over to Russia, which is also facing sharp EU criticism, and lead to a weaker RUB.
Equities. US equity futures declined after the Democrats and Republicans again failed to agree on new fiscal support measures. The negative sentiment is further affected by the news that President Trump tested positive for COVID-19, which increases uncertainty.
FI. Italy led the general EGB rally yesterday. The 10Y BTPs-Bund spreads tightened 3bp to 135, which is only 5bp higher than year-to-date tightest levels. Italy’s 30Y bond fell to record-low 1.72%. Rising excess liquidity, October being heavily net cash flow positive plus moderate positive risk sentiment, combined with Italy only coming to the market on 13 October may all have contributed. The TLTRO settlement on Wednesday amid month and quarter-end, led to the €STR fixing dropping by 1.4bp to -57.0bp. The fixing this morning will indicate to which degree the turn-effect drove this.
FX. EUR/USD steady yesterday in the 1.1750 area. EUR/Scandies also continued to trade with a downside bias as risk appetite stayed afloat. Meanwhile, EUR/GBP bounced back and forth on Brexit news and such headline-sensitivity is likely to persist near term.
Credit. Credit markets took a small step tighter again yesterday, with iTraxx Xover 3bp tighter and Main around half a bp tighter
Nordic macro and markets
No macro releases out of Sweden today. Instead, the Swedish National Mediation Office will have its yearly fall seminar (a webinar this year) regarding the Swedish wage-formation, where Riksbank’s Henry Ohlsson is invited to speak. As the Swedish wage round has just re-commenced (postponed from March), the webinar will focus on the effects of the pandemic on Swedish wage formation and short-term work.
In Norway, we expect the registered (full-time) unemployment rate dropped from 4.2% in August to 3.9% in September, with risk tilted slightly to the downside.
