Market movers today
Today, we get German ZEW expectations, which will probably indicate a continued downturn in the macro momentum.
In the US, we get industrial production figures for September.
Markets will listen in on hints on the Fed’s take on last week’s high inflation figures, when FOMC members Bostic and Kashkari speak.
The 60 second overview
UK politics: Britain’s new chancellor Jeremy Hunt made a historic U-turn yesterday, when he scrapped Prime Minister Liz Truss’s economic plan. The Gilt market rallied on the news with the 30Y Gilt yield down 40bp, although still higher than before the tax cuts were presented. According to FT, the Bank of England is likely to delay QT, scheduled for 31 October, until they see greater stability in gilt markets. GBP traded significantly stronger against both USD and EUR on the news.
Energy: Energy markets have provided some comfort recently with European natural gas prices trading at EUR59 per MwH, as many European gas inventories are nearly full, including Germany’s. Historically this is still a high price, but it is a very big drop compared to the EUR200-300 price level we saw in August and September.
JPY: In Japan, we have seen further verbal intervention this morning from the FM and chief cabinet secretary following the JPY slide to 32-year lows against USD. As Bank of Japan’s governor Kuroda indicates, FX moves are more in line with fundamentals, which explains why we have not seen JPY buying yet.
Equities: Markets rallied yesterday, without obvious triggers but a cocktail of solid earnings reports, lower yields, easing risks in the UK and easing gas prices. S&P 500 gained 2.7%, Dow 1.9%, Nasdaq 3.4% and Russell 2000 1.2%. Yesterday it was time for growth to shine, with all FANMAGs up 6-7%. Yield sensitive sectors in the lead, like real estate, consumer discretionary and tech while defensives underperformed. US futures are 2% so the rally could continue over the day.
FI: European rates declined driven by the anticipation of (yet another) a political U-turn in the UK. Bunds declined 7bp from the start and range traded through the rest of the day.
FX: In FX markets, the beginning to the week has been characterised by broad based USD weakness and a UK politics relief rally in GBP. HUF has continued its strong performance following last week’s surprise hike by MNB. Overnight NZD jumped on kiwi-inflation figures while USD/JPY continues to hover just below the 149 level. Both SEK and NOK have also been off to a solid start to the week with EUR/NOK trading just above 10.30 while EUR/SEK has settled in the mid-10.90s.
Nordic macro
The parliamentary hearing of the Riksbank, planned for today, has been cancelled. It is the Riksdag, not the Riksbank that has decided this. The reason is that it would collide with the new PM presenting his government. A new date for the hearing has not yet been decided. Instead, we have to settle with a speech by Per Jansson 15:40 CET on how make sure inflation returns to target.
