Market movers today
- In the euro area, ZEW economic expectations for September are released and will likely show a further loss of momentum ahead, in line with our expectations (see Big Picture – Delta delayed recovery, 6 September).
- In Sweden, the Swedish Debt Office (SNDO) is set to publish their monthly report on the central government’s debt and the outcome of payments for August. The latest forecast (May) indicate a negative net borrowing requirement (=surplus) of SEK21,3bn.
- In Denmark, industrial production figures for July are released today.
The 60 second overview
Monetary policy: The Reserve Bank of Australia (RBA) decided to go ahead as planned with tapering its bond purchases from AUD 5bn to 4bn/week, seeing the economic setback as only temporary. Markets had speculated that the tapering, which was originally announced back in July, could be delayed due to the worsening Covid-situation. RBA thereby joins a growing number of central banks scaling back its emergency bond purchase programmes. Next in focus will be the ECB’s and Fed’s tapering plans later this week/month.
Energy costs: On an otherwise quiet start to the week, commodity markets set the tone. European natural gas futures surged to record highs as the amount of Russian gas flowing into Europe through a key entry point dipped, increasing supply concerns. European stockpiles are about 20% below the seasonal average just weeks before the heating season starts. Higher prices for carbon permits under the EU’s emissions-trading system also contributed to the recent price increases for natural gas, raising the risk that European energy price inflation stays elevated.
Equities: Buoyant start to the week, with thin volumes as US markets were closed for holiday. Europe and Asia however edged higher. Growth and quality took the lead, with tech and health care among the winning sectors, as markets discounted lower rates for longer. Risk on, with cyclicals generally beating defensives. Stoxx 600 closed up 0.7%, Stockholm 1% (compounders and investment companies in the lead) Copenhagen 0.7%, Oslo 1.4% and Helsinki 0.6%. Asian markets are mostly higher, not least in Japan adding another 2% on stimulus hopes. US futures points to a slightly positive opening.
FI: While US was out for a holiday, European rates ended slightly lower across the board. Supply announcements were in focus with Spain mandating a 20y green bond, which is expected to be today’s business with market musings mentioned for EUR 5bn. Intra-euro area spreads were mixed, despite the general positive risk sentiment. Inflation linked bonds and swaps rallied yesterday with the DBRi 2030 ending almost 5bp lower at -2.05% with 5y5y EUR inflation swaps ending at 1.75%, a level not seen since 2018. Ireland announced that they will offer the 0% 2031 and 0.55% 2041 bond on Thursday, where we expect EUR 1-1.5bn in volume.
FX: NOK and USD were top performers among G10 currencies yesterday vis-à-vis AUD, NZD, GBP and SEK. EUR/NOK traded around the 10.28 level, EUR/GBP close to 0.86 and EUR/USD fell towards 1.1860.
Credit: Sentiment in credit took a turn for the better yesterday with iTraxx Xover tightening 2.7bp (taking it to 225.8bp) and Main closing ½bp tighter in 44½bp. HY bonds tightened 3bp while IG remained under a slight pressure and widened around ½bp.
Nordic macro
In Denmark, industrial production figures for July are released today. Industrial production was down 4.3% in June, but the figures tend to fluctuate considerably month to month. Recent business confidence indicators revealed that order books had dipped, but activity levels across Denmark’s export markets remain high. Wednesday is also scheduled to bring foreign trade figures for July, and these have generally performed very well throughout the corona crisis, although the latest quarter was not particularly impressive.
