Market movers today
- The final Q4 GDP numbers for the Eurozone are released today, which are likely to show that private consumption drove the 0.6% q/q contraction in Q4.
- In the US, the House of Representatives’ is likely to cast their final vote on the Biden administration’s USD 1.9 trillion fiscal package that passed the Senate over the weekend. However, the vote could also slip to Wednesday.
- Overnight, Chinese CPI numbers for February are likely to show that CPI deflation deepened last month driven by lower pork prices and sluggish core inflation.
- Norwegian regional survey is released today and is expected to show a positive picture, but given the pandemic there is more uncertainty. There is a string a Swedish data as well.
The 60 second overview
Macro: ECB “surprised” the markets with modest buying in the PEPP despite rising yields as the net purchase in the PEPP was only some EUR 12bn. Hence, we have not really seen a response so far to the rising yields. The reaction to the modest net purchase was muted.
In China, there are indications that Chinese state funds have probably intervened in markets as the CSI300 was down more than 3% earlier this morning, but is now close to an unchanged level relative to the opening.
We have a string of economic data out of Sweden this morning as well as the regional survey in Norway. The Swedish data are expected to show a modestly positive picture for the economy. Growth is expected to pick in the regional survey from Norway, but given the recent new restrictions there is some of uncertainty. See more below in Nordic macro and markets section.
Equities: Volatility continues to be elevated in the equity market and rotation continues to unfold. Tech, communications services were massive underperformers yesterday as value extended its strong outperformance with financials, materials and industrials among the standouts. In US, massive divergence across indices with Dow +1.0%, S&P500 -0.5%, Nasdaq -2.4%, Russell 2000 +0.5%.
Most indices are higher in Asia this morning but it comes with large volatility as well and Chinese state funds have probably intervened in markets as the CSI300 was down more than 3% earlier this morning.
US futures are higher this morning led by tech stocks while European futures are flat.
FI: There were modest movements in European yields yesterday despite the low amount of net purchases in the ECB PEPP programme. ECB’s net purchase was close to EUR 12bn and even though there was a big redemption from Italy last week it does not seem to have increased the PEPP outright purchase despite rising yields. US yields were also range bound yesterday. 10Y US Treasuries have declined a few bp in Asian trade this morning.
The weekly Japanese investor flow data showed significant selling of foreign assets from mid-February and changing the trend we saw in January, where there was significant buying of foreign assets. See more in our Japanese investor flow presentation from yesterday.
FX: FX markets are currently characterised by continued USD strength and oil-currency performance with NOK, CAD and RUB leading gains in FX majors’ space. Yesterday, EUR/USD broke below 1.19, EUR/NOK temporarily hit 10.20 and NOK/SEK broke firmly above parity.
Credit: Movements in credit were very subdued yesterday. iTraxx Xover was more or less unchanged at 257bp and Main ended around ½bp tighter at 50bp. Both HY and IG bonds were unchanged.
Nordic macro and markets
Sweden. Today we get a batch of Swedish hard macro data for January which will give further insights as to how the year started. SCB has already reported a monthly drop in hours worked. However, we expect to see a rise in household consumption, private sector production (PVI) as well as the activity indicator. First, retail sales rebounded sharply in January after a severe slump in December. This suggests a slight recovery in January consumption, too. Secondly, NIER data showed that the negative impact on consumer services appears to have bottomed in January so there will probably not be much of a drag from that area. Even though the manufacturing PMI slowed slightly to 62.5 in January, the high level itself suggests a further significant expansion of manufacturing activity. The services PMI, which appears to largely capture business-related services rather than consumer-related ones, shot higher in January, printing a strong 59.6. Thirdly, with most activity components, except hours, are pointing higher we believe the activity indicator will rise too.
In Norway, Norges Bank will publish the Regional network survey for Q1. Growth has been better than expected despite additional coronavirus restrictions hitting parts of the service sector. The reason seems to be strong growth in sectors not directly affected by lockdown measures, and this should increase optimism. We stress that interpreting the index has been harder during the pandemic because of the huge fluctuations in activity over the past year. Nor can we rule out the possibility of higher infections and new restrictions having put a damper on optimism.
Earlier this morning, we have January GDP-figures. We expect the closure of some services and retail in parts of the country to pull mainland output down by 0.5% m/m, in line with consensus.
Finally, the government will announce new corona restrictions, maybe on the national level as well. We expect lock-downs in the accommodation sectors, and possibly in non-essential retail trade, besides measures aimed at reducing social mobility. Given the experience with similar lock-downs in November and January, we expect this to have an economic impact purely on sectors in direct lock-down. We have already penciled in some restrictions in March, and have been expecting a moderate drop in mainland-GDP in March.
