Market movers today
- We kick off this week with the flash August print for German CPI. We will likely see slowing growth mom but still see yoy inflation above 3%.
- Overnight we also get the official NBS August manufacturing PMIs out of China. We look for a small further decline.
- Through the rest of the week, we will be looking out for Euro Area HICP and the August jobs report from the US in particular.
The 60 second overview
Tapering but when and how much? Fed Chair Powell held his long-awaited speech on Friday but he was interpreted as dovish, as he avoided delivering any details on the Fed’s tapering plan, besides that the conditions are likely met later this year. As most expect the Fed to announce a tapering plan this year, the main question is the exact beginning of tapering and not least how fast the Fed is going to taper. We stick to our view that the Fed will announce more details at the upcoming meeting here in September (after what we expect is a good jobs report on Friday) and that the Fed will conclude tapering mid-2022. Asian markets advanced overnight digesting Powell’s Jackson Hole speech.
German Kanslerdebate: With four weeks to the German election, the CDU/CSU’s Laschet, Greens’ Baerbock, and SPD’s Scholz met in the first of three major debates. A snap poll pointed to Scholz winning the debate. The German election is shaping up to a close call, with Scholz currently the chancellor favorite, however, his party may still be the biggest hurdle to success.
Equities: Equities ended last week on a high note as Powel gave investors a bit more time to enjoy the goldilocks scenario. Gains were broad-based but investors had a clear preference for cyclical and small-cap stocks (Russel 2000 having its best week since March). It was interesting to see Powel’s effect on markets and it goes without saying that Fed and Powel will have a massive impact on equities in H2. In US Friday, Dow +0.7%, S&P 500 +0.9%, Nasdaq +1.2% and Russell 2000 +2.9%. The positive sentiment continues this morning with all Asian markets in green and both European and US futures higher.
FI: Yields fell slightly lower on Powell’s speech.
FX: EUR/USD was briefly above 1.18 and EUR/NOK and EUR/SEK fell below 10.30 and 10.20, respectively, after Fed Chair Powell failed to deliver more precise details about the Fed’s tapering plans.
Credit: Credit markets tightened post the marginally dovish signals from the Jackson Hole symposium. iTraxx main tightened slightly by 0.8bp to 45.2bp. The HY segment also edged tighter with the Xover index shedding 3.4bp taking it to +229bp.
