Market movers today
- Today’s highlight will be the US non-farm payrolls. Labour supply issues remains a key macro theme, and US labour market developments are particularly interesting to watch now that the Fed has started tapering and rate hikes are foreseen next year. With our expectation of a 450k jobs growth in October (vs. 194k in Sep) we are slightly more optimistic than the consensus (425k)
- We also keep an eye on industrial production figures from Germany after a weaker than expected rebound in factory orders on Thursday.
- Euro area retail sales data is also due today. Consensus expects 0.2% growth m/m in September vs. 0.3% in August.
- On the ratings side, we may get updates from Fitch on France and from Moody’s on Italy.
- In Sweden, the Debt Office releases October borrowing requirements, see more below.
The 60 second overview
Bank of England unchanged: In line with our base case, BoE kept monetary policy unchanged yesterday. They signalled that a rate hike will be appropriate in the coming months if data is broadly in line with expectations. We continue to expect three hikes next year.
Norges Bank: As expected NB kept policy rates unchanged. The current rate path continues to indicate a hiking cycle starting in December.
German manufacturing: September factory orders disappointed somewhat with a modest rebound of 1.3% following a steep 8.8% decline in August. The recent slowing is likely related to the lack of supplies. Orders remain at a high level though, about 10% above the pre-pandemic level.
Global slowdown: This morning we released Top 10 global cycle indicators – more weakness where we track the outlook for the global manufacturing cycle. As the title indicates, the majority of indicators still point to more weakness in global PMI’s over the next six months. A small ray of light is a turn in our Chinese credit impulse, which points to a bottom in the global cycle in around 9 months. But until then we are likely to turn lower.
Equities: Equities closed mostly higher on Thursday in an uneventful session. As yields ticked lower, the big story was growth outperforming value. Sector performance was well known from last year, with (semis) and consumer discretionary (AMZN, autos) leading the way while financials came under pressure. S&P 500 closed up 0.4%, Dow -0.1%, Nasdaq 0.8% and Russell 2000 -0.1%. US futures are unchanged this morning and Asian markets mostly lower.
FI: There was a significant rally in the global fixed income markets after the Bank of England monetary policy meeting. BoE did not hike rates and sounded a lot less hawkish compared to the market pricing. This took the markets completely by surprise and bonds fell significantly and spreads such as the BTPS-Bund spread tightened.
FX: Oil prices dropped after OPEC+ decided to go ahead with its planned output hike. As expected, the EUR/GBP moved higher on BoE. EUR/DKK dropped to the lowest level since the beginning of October. The importance of clear central bank communication became crystal clear yesterday in the CEE FX space.
Credit: Credit markets – and particularly the high-beta segment performed very well yesterday. iTraxx Xover tightened 10.5bp (closing in 248bp) and Main 1.7bp (to 48.8bp). HY bonds tightened 4bp while IG ended broadly unchanged.
Nordic macro
In Sweden, the Debt Office releases October borrowing requirement, it expects to borrow SEK14.1 bn. This is the first print after the new forecast was announced in late October. The Debt Office has gradually been reducing the funding forecast for more than a year now. It remains to be seen whether this trend continues or enough is enough now.
