Market movers today
- We open the week with a few interesting figures out of the Nordics. We expect an increase in March inflation in Denmark and a decline in Norwegian GDP in February, see more below.
- Later today, we get euro area retail sales for March. Sales have suffered in recent months from the lockdowns across EU.
- During the week, focus is going to be on inflation prints in the US and Sweden, US retail sales and Chinese GDP figures for Q1. Most interesting will be the reaction to US inflation, which is expected to rise to 2.5% from 1.7%.
The 60 second overview
Macro: Federal Reserve President Jerome Powell stroke an upbeat tone yesterday telling CBS 60 Minutes that the US economy is at an “inflection point”. Powell said “we feel like we’re at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly”, see Reuters and interview from CBS. Powell pointed to vaccinations and fiscal stimulus as key drivers. On Friday we published a piece providing an overview of US President Joe Biden’s new infrastructure package and the economic agenda ahead, see Research US: Biden’s economic agenda means upside potential for growth in 2022-24 9, April. It will take a while to get through Congress but it could add further upside to US growth in coming years.
Equities: Investors concluded the buoyant week on a strong note. US outperformed with S&P up 0.8%. Cyclicals beat defensives, although healthcare led the market. US futures point to a muted start of the week, and Asian markets are lower this morning.
FI: European bonds were under pressure Friday, notably in the 5 to 10y areas as markets are starting to digest the comments from a split ECB governing council, which suggest a very influential hawkish camp wanting to discuss taper in Q3. The intra-euro area spreads were broadly unchanged on the day with the exception of Italy where media reported a potential increase of EUR35-40bn in required borrowing from Italy. The BTPs-Bund spread widened 4bp on Friday.
FX: EUR/USD finished last week slightly below 1.19, having rallied since Easter. EUR/GBP continues to trade slightly below 0.87. Last week, EUR/SEK had its best week so far this year dropping to now around 10.16. NOK was among the losers last week with EUR/NOK now trading around 10.12.
Credit: HY bonds were the winner on Friday, tightening around 2bp on average, while IG bonds closed ½bp wider. iTraxx Xover closed 1½bp wider (at 246bp) and Main widened marginally ending in 50½bp.
Nordic macro and markets
In Norway, the monthly GDP figures have been relatively volatile since November, probably due to the frequent changes to coronavirus restrictions both nationally and regionally. Although there was a moderate relaxation of regional restrictions in February, there was also a moderate rise in unemployment during the month, which would suggest that growth deteriorated somewhat. We therefore expect mainland GDP to fall 0.2% m/m in February.
We also get CPI inflation in Denmark for March. We expect inflation to increase to 0.9% from 0.6% in February. Increasing fuel prices is the one key driver as big increases replace a huge plunge last year in the inflation measure. The other driver is package holidays and air fares which also adds significantly to inflation in March as a large seasonal decline in the imputed price indices weighs very light with the new weights. The big joker is clothing prices, which is completely off its usual seasonal patterns due to the lockdown. We expect an increase in clothing prices in March before an early summer sale kicks in. We look for inflation at 0.9% for 2021 as a whole.
