Market movers today
- Today it’s time for Flash PMI for both the US and the Euro area for August. We look for a small decline in both numbers as the global manufacturing cycle has likely peaked as witnessed by the falling momentum in commodity prices lately and weaker Chinese PMI’s.
- US existing home sales is also due today.
- Rest of the week focus will be on Jackson Hole Fed conference starting Thursday and we also get the German Ifo business survey for August. In the Nordics we get the Swedish GDP indicator and retail sales as well as Norwegian retail sales.
The 60 second overview
We are seeing a bit more positive market sentiment this morning with Asian equity markets rising combined with a slight rise in Treasury yields, although 10Y Treasury yields continue to range-trade around 1.25%. The dollar also weakened very modestly. The rebound in the equity market is mainly seen as investors “dip buying” after the recent decline and while we wait for more information on the rise of the infections in the global economy as well as the comments from the Federal Reserve Chairman at the Jackson Hole conference, that is taking place this week.
There is plenty of economic data the week, where we begin with the PMIs for the Euro area and US. Furthermore, there is German IFO indicator, US GDP numbers on Thursday and US personal income and spending data on Friday.
Bitcoin is close to trading above USD 50.000 again since it was down to USD 30.000 back in July. In Germany, Chancellor Merkel’s party slumped to the lowest number in the polls ahead of the German election, while the Social democrats rise to highest level of support in four years. CDU/CSU is down to 22%, while SPD rose 3% to 22% and are now at level with CDU/CSU.
In Sweden, PM Stefan Lofven is stepping down after 7 years as prime minister. This was highly unexpected and he will end his term in November as both PM and leader of the Social Democrats at the party congress. Finance Minister Magdalena Andersson is seen to be the front-runner to replace him and will most likely become the new PM.
Equities: Equities recouped some of the losses on Friday. Despite the kickback, the accumulated loss amounted to -1.5% for the week (MSCI World). Defensives took a breather on Friday but in its place investors bought into quality, while value cyclicals and banks remained laggards. In the US, S&P 500 closed up 0.8%, Dow 0.7%, Nasdaq 1.2% and Russell 2000 1.7%. Implied volatility took a leg lower, with VIX closing in south of 20. Asian markets are bouncing around 2% this morning with tech rebounding. US futures point to a more modest but green opening.
FI: 10Y US Treasuries continue to trade in a tight trading range ahead of the Jackson Hole conference this week. The focus today is on the PMI data for US and the Euro area, which is expected to show that the PMI has peaked. This should keep Treasuries and Bunds range bound, while the ECB QE will continue to tighten spreads between core and semi-core EU govts.
FX: For EUR/USD, attention will turn to the release of manufacturing PMIs. There is likely further downside risk for EUR/USD and EUR/JPY alike. Swedish politics is also in the spotlight.
Credit: There were only small moves in credit on Friday where iTraxx Xover tightened 0.8bp (to 237bp) and Main closed only 0.1bp tighter (in 47bp). Both IG and HY bonds were unchanged.
Nordic macro
Swedish PM Stefan Löfven announced on Sunday that he resigns as chairman of the Social Democrats and thus PM, at the party congress on 3-7 November 2021, less than a year before next election (11 September 2022). The process to find a successor has started and the nominating committee will present their candidate ahead of the congress. Who takes over? Current FM Magdalena Andersson is favourite runner-up. Other candidates are Mrs Hallengren, Mr Shekarabi, Mr Damberg and Mr Ygeman, all members of the government, are also up there. A new PM will be elected in the midst of hectic and difficult budget negotiations (where Andersson – if elected her successor – plays a key role), a budget that is planned to be voted on in late November/early December. The government’s budget runs a big risk of not being accepted by the Riksdag, and the New PM might have to govern on the opposition’s budget, not a smooth start in office, but also what Löfven on occasions has been forced/accepted to do. That precarious risk underlines the fragile situation for the government that has become even weaker after the political turmoil this summer. We have an extremely interesting, and uncertain, political year ahead of us, something markets should at least keep one eye on.
