Market movers today
- In the euro area, Sentix investor confidence for April is likely to have ticked up further amid strong global economic momentum.
- Central bank minutes are being released for FOMC and ECB. Regarding Thursday’s ECB accounts we look for a discussion about the degree of accommodation and its discussion on financing conditions.
- In addition, discussions of an infrastructure package in the US is also a key market focus along with COVID-19 problems in Europe.
The 60 second overview
US data: US data is firing on all cylinders. ISM services has hit an all-time high at 63.7. ISM Manufacturing has manufacturing activity at 64.7, the highest level since 1984 and jobs data showed nearly one million jobs were created in March. Across the board and given somewhat sideways interest rates, US equity markets (and global) have rallied over the Easter holiday. This data seems to well support that US equities are hovering around all-time highs, also backing the recent rise in interest rates and low credit spreads.
US jobs: US employment rose 916.000 in March, led by 280.000 jobs in the hard-hit leisure and hospitality sector. In part, this is due to a number of states having eased on restrictions. We expect US employment data will be very strong this year as 3 million are vaccinated per day. Pent-up demand and fiscal support will also be strong tailwinds. We see unemployment as going below 4% during H2.
Oil: Oil prices dropped back yesterday in what looks like a lagged response to OPEC+ decision from Thursday to go ahead and start normalizing output. It is not a game-changer for the oil market in our view, as it was only a matter of time before OPEC+ started pulling back support. Indeed the outlook for demand looks much brighter amid reopening in US and vaccine rollout in Europa and support from monetary and fiscal policy. We look for oil prices to stay range bound short-term.
Equities: While Europe continue to celebrate Easter yesterdays, US equity indices ticked higher with S&P 500 and Dow both setting new record closes. Dow +1.1%, S&P 500 +1.4%, Nasdaq +1.7%, Russell 2000 +0.5%. Cyclicals continues to outperform, while defensives have flat-lined. Growth outperformed value, though both factors saw good gains. Growth have made a solid comeback the last week outperforming value by 2.5% measured by MSCI global value and growth indices. This morning we see a mixed performance in Asia with Japanese equities lagging other markets. European futures are high as they are doing some Easter catch up while US once are slightly lower.
FI: After two days of closed EGB markets, the European rates will digest the strong US labour market report, renewed lockdowns in Europe as well as ‘fresh’ balance sheets from quarter end as well as end of the Japanese fiscal year. With these factors to be digested, it may be a bumpy start to the short week. The US 10y Treasury sold off 3bp on Friday after the US labour market report. Treasuries traded mostly sideways yesterday.
FX: Easter has generally been characterised by a minor setback in the broad USD while EM currencies have been the biggest winners. EUR/USD has moved back to the 1.18 figure while USD/JPY has hit the 110 support level. In the Scandies, it has been some rather uneventful sessions with EUR/NOK still hovering above the 10.00 threshold while EUR/SEK has crept above 10.25.
Credit: Credit markets enjoyed a couple of good days prior to Easter. iTraxx Xover tightened to 245bp (-16bp) and Main to 42½bp (-3bp). HY bonds tightened 10bp and IG 1bp.
Nordic macro and markets
Sweden releases services PMI for March at 08:30. In February the overall index rose above 60, which alongside the pickup in manufacturing to 63.7 indicate continued strong momentum.
