Market movers today
- Today’s key release is the US ISM service index. The ISM service index has been high for a while, partly because transportation has benefited from the manufacturing boom. The index is probably not a good indicator for whether we are going to see a normalisation of the consumption pattern.
- In the euro area, we get retail sales in May. Consensus is looking for an increase supported by the gradual easing of restrictions in May.
- We also get ZEW expectations.
The 60 second overview
ECB comments: ECB Official Schnabel said over the week-end that the inflation could be allowed to temporarily overshoot target while the economy recovers, while Klaas Knot (hawk) warned about rising inflation and the risk that inflation would become entrenched. Yesterday, ECB’s De Guindos said that ECB must ensure that the recent rise in inflation must not become permanent.
There is significant focus on the comments from the ECB officials as the markets are awaiting the monetary policy review from ECB that is scheduled to be published later this year. However, short term there has been modest impact on the comments from the week-end and yesterday. ECB de Guindos are again speaking today.
Oil prices and OPEC: The tensions within OPEC+ with no deal on boosting oil production continues to drive oil prices higher with the rift between Saudi Arabia and UAE increasing. Yesterday, the US President Biden urged OPEC+ to make a deal given that higher energy cost will limit the economy recovery. The market impact have so far been limited as the situation despite there is no deal, but the situation is very “fluid” and thus we need to see more tensions within OPEC+ before the rise in oil price would be more persistent.
Equities: Buoyant start to the week but in dampened trading volumes as US markets were closed for holiday. The value vs growth trade continued to zig zag, this time to value’s advantage with banks and materials among best sectors. European equities were all higher, with Stoxx 600 up 0.3%. Sentiment continuing this morning with US futures slightly higher with Nasdaq the only exception. Asian markets mixed with Japan outperforming.
FI: There was modest movements in the European government bond yields yesterday despite the rising oil prices on the back of the problems of reaching deal in OPEC+. The recent rise in e.g. 5y5y European inflation expectations from 1.5% during mid-June to currently 1.61% has had modest impact on European yields.
FX: FX markets were quite calm yesterday as US was off, there was no major macro releases and risk sentiment was broadly stable.
Credit: CDS indices were largely stable on Monday. iTraxx Xover tightened around ½bp (closed at 226bp) and Main was unchanged (closed at 45.5bp). Both HY and IG bonds were unchanged at end of day
Nordic macro
Yesterday the speaker of the Riksdag proposed the previous PM Loefvén again to try to form a new government. The Left party has since before said it will lay down its votes and hence opens up for him. But at the same time says it does not take part in budget negotiations and will propose its own budget. The Centre party says it will open up too for the PM based on the realization of a deal with some specific action, but it will too present its own budget. The Greens (which were in coalition with Loefvéns Social Democrats) said it will support Loefvén but push back of the Centre party’s deal. Hence, these stances appears to be incompatible form a budget perspective (which will be a problem later on this autumn). For now, however, it seems as if Loefvén will be accepted as PM on Wednesday’s vote of confidence as he will not be rejected by a majority in the Riksdag (negative parliamentarism). Loefvén has said he will resign if he does not get support for his budget later this autumn.
Riksbank buys municipality bonds today in three different maturities.
