Market movers today
- Today is a very quiet day without any important data releases. This week, we are looking forward to the ECB meeting on Thursday and the preliminary PMIs for July due out on Friday. .
The 60 second overview
OPEC+: On Sunday OPEC+ (OPEC and additional oil-exporting countries including Russia and Kazakhstan) agreed to gradually scale back production cuts implemented as prices tumbled at the outbreak of the pandemic in early spring of last year. The cartel said it targeted the end of 2022 as the end of current in-place cuts. The initial increase in production will add 400,000 barrels per day starting in August rising to 2m barrels at the end of this year, and continuing to increase until the accumulated cuts of 5,8m barrels per day has been revived. A deal has been long overdue with the UAE and Saudi Arabia clashing on multiple occasions in public recently, as UAE have found its production baseline set at a too low level. The oil price has been increasing throughout this year and is currently standing at USD 73 per barrel up from USD 52 at the beginning of the year. The price has been declining somewhat in past days (and this morning) as expectations moved towards a deal.
German polls: Opinion polls out of Germany on Saturday showed only small changes with support rising slightly for the Greens now standing at 18% of the popular vote and CDU/CSU at 28%. The 18% would be enough for the Greens to enter into a coalition with SPD (17%) and FDP (12%). Polling was conducted in part before large floods destroyed multiple towns in the western part of the country.
Equities: Equities are in general lower this morning with tech continuing to underperform. Nikkei is down 1.3% and Hang Seng 1.6%. S&P futures also indicates a weak opening to US markets later in the day and is down 1%. Equity markets have been somewhat under water during the past week as new covid-19 cases are currently growing globally. However, with almost all risk groups being fully vaccinated in the US and Europe, there should be a low correlation between new cases and hospitalisations.
FI: US government bond yields declined only modestly on Friday by 1bp in the 10y segment (10y yield now standing at below 1.30%) and curves flattened further. This morning sees the same trend continue. US retail sales covering the month of June showed a convergence towards a more normal consumption pattern among American households (ie. more service spending and less DIY), however, was not a market mover in rates.
FX: The USD ended last week on a strong footing and with the support from Friday’s US retail sales release the greenback ended last week as one of the clear outperformers. In the Scandies, the NOK continues to trade on the back foot which reflects the global investment environment and not domestic news. EUR/SEK has broken above the 10.20 threshold and COVID-19 delta fears have weighed on GBP with EUR/GBP now back above 0.8550.
Credit: In line with European equities, credit remained under pressure on Friday where iTraxx Xover widened 1bp (to 238bp) and Main also widened slightly to close in 47½bp. HY bonds widened 1bp while IG was unchanged.
