Market movers today
US NFIB Small Business Optimism index will be published for July and the focus will naturally be on how inflation and labour market indicators have performed amid the recent recession fears.
Chinese July Producer Prices will also be released overnight, consensus is looking for moderating price pressures following the recent signs of easing supply chain challenges.
The 60 second overview
Oil: A deal to revive the 2015 Iran nuclear deal could be close. The final details were put down in writing in Vienna yesterday and now it is a matter of whether US and EU are ready to accept the deal that could see a return of Iran’s oil exports to the global market. A decision could come within weeks.
Germany: German forward power prices continue to surge. A new concern for power plants is the water level at the Rhine river. At a water level of 40 cm, the transportation of coal to plants to generate electricity will become severely hampered.
Equities: Equities finished close to unchanged on Monday. The negative correlation with the oil price continued, and as oil prices climbed somewhat higher, equity sentiment retreated. Similarly, the growth outperformance stalled despite a 10bp drop in yields although this also had to do from weak tech earnings reports in the US. Defensives somewhat more upbeat than cyclicals, illustrated in bond proxy real estate doing better than for instance tech companies. Dow 0.1%, S&P -0.1%, Nasdaq -0.1% but Russell 2000 adding 1% due to meme stock rally. US futures are pointing slightly higher this morning while European futures are lower.
FI: There was a decent rebound in the global bond market after the sell-off on Friday. However, we did see a spread widening between Italy and EU peers on the back of the negative rating event from Moody’s. The front-loading of rate hikes from the Federal Reserve was supported by the labour market data on Friday, and forecasters are changing their forecast for 75bp rate hike in September and some could even see a 100bp rate hike.
FX: AUD, NZD and SEK gained vis-à-vis EUR, GBP and USD yesterday. The move erased some of the USD strength following the strong US jobs report on Friday and came despite a weak start to the week for commodity prices.
Credit: Credit spreads as measured by iTraxx Main ended the day slightly tighter by 2bp to 100bp yesterday, while Crossover was tighter by 14bp to 505bp. The USD primary market remained busy driven in particular by the FIG segment, with European names such as BNP (AT1 capital) and Credit Suisse (hold-co senior) also being active.
