Market movers today
- The main event of the day is the FOMC meeting with its decision at 19:00 CET. We do not expect any changes to monetary policy today, but we expect the Fed to revise higher its GDP growth and inflation projections (although the former more than the latter). We expect the median dot for 2023 to continue signalling no rate hikes through 2023 although some individual dots are likely to show the first rate hike in 2023. We also anticipate Powell will repeat that discussions on tapering and rate hikes are premature. Look out for any clues on whether SLR is extended or not although a decision does not need to be taken at this meeting (not a FOMC decision).
- Euro Area’s February final inflation is also due for release, but we do not expect it to be a major market mover.
- Finally, the focus will continue to be on the debate around the AstraZeneca’s vaccine, as at least 13 EU countries have now decided to temporarily suspend the use of the jab. EMA signalled yesterday that there is no indication of the vaccine causing blood clots but final conclusions will be released on Thursday.
The 60 second overview
AstraZeneca vaccine: Market attention continues to be on the AstraZeneca vaccine which got another setback yesterday with Sweden and Lithuania joining most EU countries in temporarily suspending vaccination over concerns that the vaccine has caused blood clots.
Equities: Equities were in a tight range yesterday, with investors awaiting the FOMC meeting tonight. Europe outperformed US, large caps beat small caps and growth beat value, but without any clear difference between cyclicals and defensives. Huge dispersion within the US, taking S&P -0.2% lower, Dow -0.4% but Russell 2000 an entire -1.7% and Nasdaq up 0.1%. Energy were the big decliner, but financials and industrials also ranked among the losers. On the other end, tech and communication services were the leaders with the FANMAG complex all higher. Similar sentiment in Asia and in US futures this morning, with all indices pointing slightly lower.
FI: Yesterday’s trading session was all about waiting for the FOMC meeting tonight, as the AstraZeneca news did not materially impact the EGB space. 10y German Bunds traded in a tight range of less than 2bp, while the periphery underperformed by 3-4bp amid an upcoming long end Greek bond. Heading into the FOMC tonight, 10y Treasuries are setting new yield highs since the pandemic.
FX: Yesterday was another quiet day in FX space but EUR weakened sending both EUR/USD and EUR/GBP lower. We are not exactly sure about the driver, however, but it may be related to poor performance for some of the more COVID-19 sensitive sectors, which again may be related to many EU countries suspending AstraZeneca vaccinations. Today’s main event is the FOMC monetary policy announcement tonight, where we see a chance of a small drop in EUR/USD.
Credit: Slightly better sentiment in EUR credit yesterday than Monday. Xover tightened almost 3bp to 242bp and Main was around ½bp tighter, ending in 47bp. HY bonds closed 1bp tighter and IG around ½bp wider.
Nordic macro and markets
In Norway, we look forward to the Norges bank meeting tomorrow.
