Market movers today
We get lots of US data today with retail sales being the most interesting. Consensus looks for a 0.5% m/m increase in core retail sales (excl. autos and gas) in August, partly lifted by the rise in core consumer prices of 0.6% m/m.
US also releases business surveys for September from Philadelphia and New York (Empire index) giving more clues to the state of manufacturing.
Finally, US initial jobless claims, import prices and industrial production are due out.
In the Nordics focus will be on Prospera Inflation expectations out of Sweden.
The 60 second overview
Markets: After the very volatile Tuesday, following the higher than expected US CPI core numbers markets calmed down somewhat yesterday. US equity markets managed to close in green and equity futures point to a small positive opening both in Europe this morning. The VIX index edged slightly lower also indicating the calmer markets. Global longer-dated yields had a relatively volatile day but ended the day unchanged or slightly lower.
Energy: The EU Commission yesterday introduced a number proposals to mitigate the impact of the energy crisis. Recently, high margin calls on producers who have sold electricity at ‘low’ fixed priced have created a liquidity problem in the energy sector and triggered government guarantees in many countries. The Commission proposes that bank guarantees can be accepted as collateral and that the clearing threshold should be lifted. On the economic side the Commission proposes the introduction of windfall tax that should be used to shield consumers by raising EUR140bn for the member states. The cap is set at EUR 180 MWh of realized revenue. See full EU plan here. Finally, European Commission President von der Leyen said that a taskforce will be set up with Norway to look at the high gas prices.
New measures to shield consumers: France yesterday announced that it will limit gas and electricity price hikes next year to 15%, and in Denmark the government proposed a government guaranteed loan scheme, that would allow consumers to postpone the extra bill for up to five years. The budgetary impact in Denmark is small and in France the government says that a major part of the costs will be covered by the introduction of windfall taxes.
BoE: We expect BoE to hike the Bank Rate by another 50bp on Thursday 22 September, but acknowledge that it is a close call between 50bp and 75bp. In both November and December we expect further 50bp hikes followed by 25bp in February. Hence, we have lifted the end point of our projection to 3.5% from previous 2.5%, see Bank of England Update BoE preview: another 50bp rate hike in store, 14 September.
FI: Rising expectations for even more aggressive rate hikes resulted in front end rates higher while longer dated ended lower. €STR pricing now points to 135bp by year end, where markets have not ‘respected’ Lagarde’s 75bp is not the norm. The deposit rate is priced to peak at 2.5% in spring next year. The 10-year rates were marginally lower on the day, while spreads widened marginally.
FX: After a volatile session Tuesday, yesterday proved rather quiet in FX markets with the biggest move being the sell-off in HUF and the rise in JPY. EUR/USD is back hovering around parity while SEK and NOK erased part of the early-week losses.
Nordic macro
Sweden: As expected, inflation came once again out far above Riksbank’s latest forecast adding further pressure on delivering front-loaded rate hikes. We keep or call and expect the Riksbank to deliver 75bp next week although 100bp shouldn’t be ruled out. Today Prospera’s quarterly inflation survey will be out which also will be an importan input for the Riksbank regarding the size of the hike. The survey will likely show another leg up in both inflation and wage expectations. Our focus will be partly on 5y inflation expectations (2.2 % last) as these are important for Riksbank’s assessment of inflation target credibility and partly on 2y wage expectations (average of Social Partners 2.7 % last) as these cover a significant part of the forthcoming wage agreements starting March-April next year. However, a larger increase would be needed to increase the probability for 100bp hike. Markets are currently pricing 87bp on the September meeting followed by 100bp in November.
