Market movers today
- Today kicks off with the German Ifo indicator. Given the strict lockdown we expect a rather grim reading of the current assessment but also an optimistic view on the future (6m ahead) similar to other indicators such as the Zew or the PMIs.
- Starting today, global leaders will meet (virtually) through the week in the World Economic Forum usually taking place in Davos.
- Later this week focus turns to the FOMC meeting, albeit we expect Fed to signal a steady course in the no-staff projection meeting, see also Fed Monitor, 22 January. We have a very busy week in terms of ECB speakers starting with Lagarde, Lane, Panetta and Elderson today.
- The European Medical Agency is set to discuss the AstraZeneca vaccine on Friday.
The 60 second overview
The spread of COVID-19 mutations causing new lockdowns: Due to a suspicion of local outbreaks of the British corona-mutations, the Norwegian government on Saturday introduced the strictest restrictions since March last year in the Greater Oslo area, accounting for roughly 17 % of the national population: Travel restrictions, restrictions on social contact and close-down of private activities like sports, culture etc. In addition, restaurants, retail ex. groceries and pharmacies, gyms, amusements sectors etc. are closed. The restrictions were effective from Saturday and will last for at least one week. Importantly, the current number of infections is trending downwards, so the restrictions are clearly precautionary. In France, sources close to President Macron said that the country is days away from going into a lockdown.
Equities markets: Asian stocks, U.S. and European equity futures up today as investors are weighing in the prospect of additional fiscal stimulus in the US and supportive Federal Reserve policy amid the worsening pandemic.
FI: The political problems continues in Italy with PM Conte facing another crucial vote this week. The vote is on Minister of Justice annual report and is a test of the support for Conte after last week’s vote of confidence. The uncertainty is reflected in the 10Y BTPS-Bund spread, which widened to 125bp last week. This is an Italian problem and the spill-over effect on the other peripheral bonds has been limited as shown by the tightening of the 10Y Greece-Italian spread to just 1bp. Furthermore, we have not seen much safe-haven buying of German government bonds as the Schatz spread have been trading around 20bp for most of January.
FX: EUR/USD to stay in the 1.20-1.24 range for now. The introduction of strict lockdown measures in the Oslo area in isolation is a NOK negative but we underline that the global environment (weak dollar, expectations to a recovery in H2) are far more important for NOK FX.
Credit: Credit markets were in a slight widening mode on Friday where iTraxx Xover widened to 254bp (+4bp) and Main was unchanged at 49bp. HY cash bonds widened around 2bp in average while IG was 1bp wider. (+½bp), cash bonds overall did well, and HY tightened 4bp while IG was unchanged.
Nordic macro and markets
See above in the 60 second overview on Norway.
