Market movers today
- In Europe, German and Spanish CPI figures will give some early hints where euro area HICP (out tomorrow) is headed in June.
- Brussels Economic Forum will feature presentations from German Chancellor Merkel, ECB President Lagarde, and EU Economy Commissioner Gentiloni among others.
- In the US, Conference Board’s consumer confidence will show how American consumers are coping with higher prices and how they assess labor market conditions, ahead of the US jobs report released on Friday.
- In Sweden, NIER confidence surveys will give clues about the state of the manufacturing cycle and price pressures during June.
The 60 second overview
COVID: General risk appetite was sour yesterday, as concerns about the COVID-19 delta variant were spreading. Fixed income performed while global equity markets traded on its weaker footing (Dow Jones -0.4% and Eurostoxx 50 – 0.8%) where notably travel and leisure was underperforming. So far we have observed a rapid rise in UK’s COVID-19 cases despite the progressed vaccination campaign, however, we have not observed a rise in fatalities, which still remain unanswered. This will be key to watch in the coming weeks, also in the rest of Europe to gauge if the economies have to ‘get used to living with COVID-19 or if lockdowns may be re-imposed later.
Equities: Risk appetite reversed on Monday, with global equities retreating slightly, as investors rotated into defensives and growth/quality. US outperformed Europe, with S&P and Nasdaq extending 0.2% and 1% of Friday’s record levels, Dow -0.4% and Russell 2000 -0.5%. VIX snapped the week-long streak of easing by ticking up slightly. Tech and communication services were the standouts, energy the big decliner as oil pulled back. Risk appetite reversing in Asia as well with broad-based declines. US futures point to slightly lower indices.
FI: After an uneventful trading session in the morning with virtually only sideways trading, European rates declined continuously in the afternoon, ending 3.5bp lower in core countries in the 10y point and almost 5bp lower in periphery. The 10y+ area outperformed the shorter maturities in the bull flattening move. Concerns about the spreading of the Delta variant have been mentioned as a reason for the bond performance, but also the announcement of banks being mandated for a 5y and 30y EU NGEU issuance. The NGEU is expected to be today’s business and contributed to the outperformance from the 10y area. We expect a strong appetite for the syndication (the 10y syndication two weeks ago attracted EUR142bn of bids). There is no scheduled supply today.
FX: In a fairly slow start to the week reflation-sensitive currencies generally lost terrain with CAD, NOK, and NZD marking the biggest losses. The USD gained with EUR/USD moving closer to the 1.19 level and EUR/SEK and EUR/NOK now close to 10.20.
Credit: While CDS indices ended yesterday in red, with iTraxx Xover widening 5bp (to 230bp) and Main almost 1bp wider (to 46bp), cash bonds held up and HY closed 4bp tighter and IG almost 1bp tighter.
Nordic macro
In Sweden, today brings NIER’s confidence surveys, which for the past months have shown broad-based optimism across all sectors. This pattern is likely to remain the same (perhaps with the exception of the retail sector) this time around, and it is especially interesting to note any hints regarding the state of the manufacturing sector and potential price pressures.
Yesterday, PM Löfven resigned and handed it over to the speaker of the house who now has four attempts to try and form a new government with the current parliament. If that is not successful Sweden will have a snap election.
