Market movers today
- Few key market movers are due for release today, but another strong US ISM manufacturing reading in April could help markets into an upbeat start to the week.
- Later this week the UK local elections, Bank of England and Norges Bank meetings and US jobs report will capture market’s attention.
- April manufacturing PMI data are released in the Scandinavian countries today and we look for a setback in the Swedish figures.
The 60 second overview
Macro: The main event today is the US ISM data, where we expect a solid report which could add pressure on rates and support equity markets despite a negative close in the equity markets on Friday.
However, 10Y US rates have been range bound around the 1.60%-level, while German 10Y rates have risen towards -0.20% and the spread between US and EU has tightened for most of April. The Euro has strengthened versus the dollar despite the US implementing a significantly larger fiscal package relative to the EU recovery package, and the recovery in the US seems to be moving faster than in Europe. However, the Federal Reserve is keen on not tightening monetary policy too quickly relative to some of the comments from ECB officials such as Jens Weidman from ECB/Bundesbank, that government finances must not stop a tightening of monetary policy if the price outlook demands it.
The opening in the Asian equity markets is negative as most equity indices are declining. US Treasuries are unchanged in Asian trading this morning.
Equities: Global equities fell Friday without any single factor to point at. Cyclicals underperformed defensives while value outperforms growth on its fourth consecutive day. Notably, VIX headed high again touching 18.8. This comes despite the mix of remarkable earnings and macro data. In US Dow -0.5%, S&P 500 -0.7%, Nasdaq -0.9% and Russell 2000 -1.3%. Asian equities mostly lower in quiet Monday trade. Please note mainland China and Japan closed for public holidays.
European and US futures are higher this Monday morning.
FI: The upward pressure on 10Y Bunds continues and we are testing the -0.20% level, while the 10Y Treasuries remain range-bound around 1.6%, and the 10Y US-German yield spread has tightened for most 2021. There has been some speculation that the upward pressure on Bunds has been fueled by the potential for a Green government in Germany, but the Bund ASW-spread has been remarkably stable.
FX: EUR/USD dropped nearly a figure on Friday which was likely linked to the drop in equities as well as unwinding recent momentum in spot. EUR/GBP continues to trade around 0.87.
Credit: Credit grinded modestly tighter during Thursday and Friday. iTraxx Xover tightened from 252bp to 249bp and Main from 51bp to 50bp. HY tightened 2bp and IG tightened ½bp.
