Market movers today
- In the US we get April PCE inflation and personal spending data. According to consensus, US headline inflation is set to jump from 2.3% to 3.5% while underlying inflation accelerates from 1.8% to 2.9%.
- In Norway we expect good news in the wake of reopening with a decline in the jobless rate and an increase in retail sales, see more below.
- In Sweden, we get April retail sales and Q1 GDP figures. The GDP indicator has already given us a good idea of the strength of Q1 with 1.1% qoq growth.
The 60 second overview
ECB: With less than two weeks to the ECB meeting, and no comments from the usual ‘hawkish’ camp on the upcoming taper discussion, markets are reassessing the scenario of the June meeting decision to end the ‘significantly’ higher PEPP purchase pace (notably with Lagarde, Stournaras, Panetta and Villeroy’s comments). However, as the growth projections are likely going to be revised higher, paving the way to end ‘significantly’ higher volume, there may be increased sensitivity to global drivers and ECB comments that may come ahead of the silent period which starts on Thursday.
The dollar: EUR/USD remains relatively unchanged as upbeat fiscal news flow in the US (infrastructure), decent data and Fed, which openly is considering tapering, are marginal dollar positives. Overall, the rally in cyclical value equities, generally good global sentiment, the recent decline in USD/CNH is enough to counter such now, though. We think spot will be in range 1.20-1.24 over the next few weeks and the dollar will likely strengthen in H2.
Norway: In Norway, the gradual reopening of the economy means that more sectors are beginning to open their doors, with positive effects on unemployment as more and more of those laid off return to work. There has also been relatively strong growth in the sectors that have not been locked down. Based on the weekly data, we therefore expect the jobless rate to fall from 4.0% in April to 3.4% (seasonally adjusted) in May.
Equities: We have seen five days in a row with higher equities and hence MSCI world closing in on the all-time high from early May. Yesterday, we saw a small change in the sense it was an even more risk-on dominated trade with higher yields and small caps outperforming together with cyclical value. VIX took another leg lower, the goldilocks scenario is becoming more likely as the initial inflation fear seems to fade although data came out suggesting even higher inflation short term. In US equities finished mostly higher with Dow +0.4%, S&P 500 +0.1%, Nasdaq -0.01% and Russell 2000 +1.1% Asian equities gaining this Friday morning with Japan outperforming on tech strength. Both European and US futures are higher this morning.
FI: After four days of consecutive downward trend in yields, the European rates markets were under pressure yesterday on spillover from the UK Gilts.
FX: GBP and Scandies were top performers among G10 currencies yesterday, where JPY lost ground. Noteworthy EUR/GBP fell below 0.86 and EUR/SEK dropped below 10.10.
Credit: High-beta had a good day yesterday. Xover tightened 2bp (to 249½bp) and Main ½bp (to 50½bp). HY bonds tightened 3bp and IG finished marginally tighter.
Nordic macro and markets
Swedish FI markets will likely continue to digest the fact that DO made a sizeable cut in its borrowing forecast, resulting in reduced issuance in nominal bonds and T-bills. The surprise, however, was that it went through with plans to issue a 50-year nominal (starting with a SEK 10bn syndication in June) and a new 18-year linker in September.
Today, Riksbank buys SEK 0.5bn 1059 and SEK 0.75bn 1062.
SCB releases Q1 GDP, we expect 1.1 % qoq SA as signalled by the GDP-indicator. Also, April retail sales and household lending is out.
For Norway; after growing strongly for much of last year, retail sales have slowed since the autumn, exacerbated by the closure of large parts of the retail sector in Oslo/Viken before Easter. The gradual reopening will probably have boosted spending in April, which is supported by the weekly data for card payments. We therefore expect retail sales to climb 1 % m/m in April.
